The document discusses a long straddle options strategy for trading Twitter stock. A long straddle involves buying both a call and put option with the same strike price and expiration date, allowing profits no matter which direction the stock moves. Many traders have adopted this strategy for Twitter given the uncertainty around how well it can monetize its large user base. The strategy was validated when Twitter's stock fell 20% after its first quarterly report, and remains a useful approach until the company's business model and potential for growth become clearer.

1. Twitter
Long Straddle
Options Strategy

2. For those who have been hibernation for
the last several years, Twitter is a social
media company that went public three
months ago.

3. It is now eligible for options trading.

4. Twitter is where people send tweets.

5. These are text messages via the SMS
website interface.

6. The Twitter interface provides people with a
quick and easy way to communicate with
many friends and contacts at once in
messages of up to 140 characters.

7. The company was founded in San
Francisco in 2006 and in six years had half
a billion registered users who posted a third
of a billion tweets a day.

8. The service handles over a billion and a half
search queries each day.

9. Twitter is one of the ten most visited web
sites.

10. It has been one of the most successful
startup companies measured by growth,
revenue, capitalization and impact on
popular culture.

11. . The concern of many investors and traders
is how well Twitter and other social media
companies can monetize their sites.

12. As option trading begins on Twitter stock,
traders are still uncertain where the stock
price will go.

13. Thus many are adopting a Twitter long
straddle options strategy.

14. So, we know a little about Twitter but what
is a long straddle and of what use is a
Twitter long straddle options strategy?

15. Long Straddle

16. A long straddle is buying both a call and a
put on the same stock with the same strike
price and the same expiration date.

17. This strategy is the ultimate hedge in a
volatile market in which it is unclear which
direction a stock will go but in which it
seems clear that it will not stay put.

18. This stock options trading strategy has
nearly unlimited potential if a stock price
changes significantly.

19. And, with a long straddle the worst a trader
can do is lose the cost of premiums paid for
the call and put if the stock does not change
price.

20. Because many traders believe that Twitter
has not found its price range they adopt a
Twitter long straddle options strategy.

21. By using this approach a trader hedges his
risk and guarantees a profit if, in fact, the
stock moves significantly up or down.

22. However, for a Twitter long straddle options
strategy to make a profit the stock needs to
move up or down at least enough to cover
the cost of the premiums for the put and call
contracts.

23. First Results

24. Twitter stock fell by twenty percent when it
issued its first quarterly report.

25. This was a validation of the Twitter long
straddle options strategy.

26. And the issue is not resolved.

27. This is company that is still in its infancy.

28. It is immensely popular and will likely find
ways to monetize its popularity.

29. When that happens, it could well follow on
the heels of companies like Google or
Microsoft and grow exponentially.

30. The usefulness of a long options strategy in
trading options on Twitter stock is not
exhausted.

31. In fact, this may become a useful strategy
for the days just prior to each of the next
several quarterly financial report releases.