To The Moon

​$Twitter(TWTR)$ I did a SELL CALL on last Thursday because MUSK sent Twitter a buyoff offer.​

I think many people prefer to do SELL PUT. Let me talk about why I chose SELL CALL last week.

I think most of the time that SELL PUT what stock your long-term bullish is more appropriate, and just take over at a low price when the options need to exercise.

Event-driven can do both SELL PUT and SELL CALL. I  wrote some in$Activision Blizzard(ATVI)$ case. Today, let's talk about the background of TWTR, why I chose SELL CALL:

1) MUSK offered an offer of $54.2 per share, and he said in the letter that this is the best price he gave, which means not bargaining at all. That is, there is no room for price increase, and $54.2 is the upper limit of Twitter's price.

2) Usually, before the acquisition is completed, the market price will be 90%-95% of the offerring price, and if the market is not good, it may reach 855% (corresponding to about $46). Therefore, it is reasonable to do SELL CALL $52 or SELL PUT $45.

3) The stock price rose to $50-51 premarket at last Thursday and the opened price was around $48. The CALL's premium is obviously better than the premium of PUT.

4) Last Thursday, the market was not really good, and I guessed it might open higher and go lower. So SELL PUT can wait until the stock price falls.

5) From all the news, MUSK had not reached a preliminary agreement with the management. That is, the deal has lots of uncertain. Although the price is attractive, who knows whether the board will agree or not? Actually, Twitter has launched a poison pill program to prevent forced acquisition over the weekend.

6) If management doesn't agree, then MUSK may sell shares, either 100% or 0.

To sum up, I think Twitter's share price ceiling of $54.2 is more certain, so I chose SELL CALL.

Next, if the stock price continues to fall, for example, the market does not think that this acquisition will succeed, then SELL PUT may be exercised. In case Twitter's management has just resisted the temptation and refused to agree to the acquisition, the stock may fall to the price before MUSK comes.

Next, Twitter will press result on April 28th. If I do SELL PUT, I prefer to consider it from the perspective of acquisition failure. SELL PUT has a lower price, such as below $40. Because the price is around $39 before it jumped.

This is what I think on Twitter options. Thank you!