The market continues to seem way too calm for me considering a few factors: war, inflation, earnings season. The tech stocks rallied, which was good for me personally, and the VIX is down again.
One of the biggest news is that Elon Musk bought a 9% stake in #Twitter, which is a significant move for two key reasons:
1. it gave Elon more say in the company management
2. he just handed a big smack to his #1 enemy: the SEC, which constantly tries to control his rights to freedom of speech.
I do understand that the SEC is trying to prevent Elon and other big names to manipulate the market but they are trying to achieve their goals by limiting certain individuals' freedom of speech.
It's a tough world out there for the regulators nowadays as technology took away their powers. The days of tightly controlled media is replaced by platforms, like Twitter, where anyone can have a say and those with lots of followers can really manipulate the market.
But let's get back to business.
What's my today's selection?
I would say that after moving up 27% today, Twitter naked calls are good prospects but I would go super cautious and go way outside of the 1SD. Thanks to the big news the volatility jumped from 15 to 79 within seconds, which means the option prices also jumped significantly. The April $65 call has a 97% probability of profit so it's pretty much a no-brainer. Although it only gave me $0.38, I am thinking that if the stock comes down, I might sell some put options too and just let it expire.
Trade Type: Short Call
Expiry: 14 Apr
IV Rank: 71
Cap Req: $520
Annualised Prof at Expiry: 267%
Let me know your thoughts.
I didn't end up holding it till expiration as I could close it for $0.16, which equates to an annualised profit of 772%.
I have a feeling that these social media platforms are going to be more and more regulated as the governments around the world don't like the fact that they can't manipulate the mass as much as they used to.
The price of FB is probably going to go up as it's still significantly lower than what it was. Twitter may go up a bit more, which is why I selected a much higher strike ($65) with less than 2 weeks to go, but I don't think that the price is going to go up significantly over the short term.
As an option trader, I don't over analyse companies. I rely on sophisticated calculations like the volatility and the probabilities.
Given Elon musk has bought 9%share in twiter which could be partly motivated by his placing importance on freedom of speech, do you think we could see more wealthy investors taking up shares for the same reason in twitter and even other social media platforms like Instagram or Facebook? If so how would this effect the share prices and what be a good investment approach for the average cautious beginner investor like myself, Any thoughts?