Sorry, Twilio Inc (TWLO) Stock Is Still a Short

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If you don’t believe a rising tide lifts all boats, you’re in good company as it relates to Twilio Inc (NYSE:TWLO). But if you’re going to position, don’t be a targeted statistic, use an attractively priced and limited-risk long put strategy in TWLO stock. Let me explain.

TWLO Stock: Sorry, Twilio Inc (TWLO) Stock Is Still a Short

I’ve said it before and I’ll say it again, I’m not a fan of TWLO stock. But I’m still not an obsessed bear either. Again though, I still don’t mind smartly riding their on their coattails and positioning short via Twilio’s options market.

What’s more and since my last check on TWLO stock’s bearish short interest statistic, the bear population has increased from a stiff 31% to a whopping 40% over the last month. It’s clear I’m not alone in my thinking … and before you think, “short squeeze!” please be smarter than that and respect the bearish trend.

The short interest data may not be entirely fresh, but in our view it’s still a stronger measure of what’s going on with Twilio. Bottom line, the shorting suggests to either join a typically smarter money investor base or be smart enough to back away from an alluring, but flawed bullish narrative in TWLO stock.

Twilio Stock Weekly Chart

Source: Charts by TradingView

Since last writing about TWLO stock, bulls enjoyed a fleeting reprieve from an earnings-driven price gap of about 10%, but it has been all downhill ever since.

It took bears and weak-handed longs all of two sessions to reverse the gain in Twilio shares. And as of this writing, TWLO is stationed roughly 3.5% below the closing print in front of the earnings report.

So, what now? Bulls can technically try and find comfort in the post-earnings higher high pattern which has formed on the weekly chart in TWLO stock. But the fact is those buyers, outside of shorts covering, did a poor job of defending the price move. As such, I’m strongly inclined to see the weekly pivot high, without getting too hopeful, as a bearish shooting star reversal candlestick that has room to move lower.

TWLO Stock Long Put Strategy

Source: Charts by TradingView

Courtesy of OptionVue.com

My last bearish swipe at TWLO was a proffered Aug $29 put back in late July. The contract went on to double in price from $1.10 to $2.20 in just under two trading weeks in front of the company’s short-lived, earnings reaction bid.

Reviewing the options board today, a long put strategy is favored once again. Specifically, the Oct $28 put for $1.25 with TWLO at $29.25 is attractive. Backing our view are premiums trading just off all-time-lows, a discount to TWLO stock’s underlying price volatility, our bearish forecast on shares and weak market seasonality.

While risk is limited to the debit paid and keeps potential losses to around 4.25% of TWLO stock, I’d consider a money stop of 50%. At the end of the day, sometimes stops don’t work as envisioned. However, if triggered and an exit is available, it’s generally a decent policy without playing the position too tightly and being the victim of a volatile, but fleeting price spike.

Investment accounts under Christopher Tyler’s management do not currently own positions in any securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. . For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits and feel free to click here to learn more about how to design better positions using options!

The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.


Article printed from InvestorPlace Media, https://investorplace.com/2017/08/twilio-inc-twlo-sorry-twlo-stock-is-still-a-short/.

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