I play poker and trade options, seeking edges from study, reflection and analytics.

#014 TWLO Calls

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Trade Details: Bought to open 3 Nov 25th Twilio Ord Shs Class A (NYSE:TWLO) 34 calls for $1.60, $486.57 total cost (33.3% of account), 11 days to go. The trade executed at 14:10:51 when the stock was approximately $34.03.

Potential: Unlimited, but I will be watching two things to exit this trade: 1) a "mark" (the bid/ask midpoint) of $1.25 to exit the trade at a loss or 2) a MACD line/signal cross on the 2-hour chart signaling trouble ahead for daily chart technicals.

Thesis: Twilio lost its momentum after a fantastic post-IPO run. The daily chart is setting up well for another push higher (see below).

 TWLO daily chart showing an orderly sell off and the MACD signaling higher prices.

TWLO daily chart showing an orderly sell off and the MACD signaling higher prices.

I like this trade for several reasons:

  • The QQQ has moved back to a position of relative outperformance vs the major averages - while the MACD line crossed the signal line last Friday, I think the post-election "tech wreck" held down TWLO
  • Option volume is coming in heavily for TWLO calls
  • The daily and 2-hour charts are in alignment technically, specifically the MACD is diverging and just crossed the zero line on the 2-hour chart
  • With resumed momentum, the stock has plenty of room to run with the 52-week high at 100% higher from here
  • In addition to the MACD indicator, the slow stocastic %D line is moving higher off the zero line, momentum is crossing into positive territory and the RSI is bouncing back from oversold levels
  • Cloud plays remain en vogue and takeout rumors only add fuel

I was timing this entry using the 15-minute chart, but an eye doctor visit made me late to enter. Hopefully that won't lead to an untimely stop loss. I chose to use next week's at-the-money options as I am looking to capture several days of movement on the daily chart.

#014 TWLO Calls Closed Profit

#013 SLB Calls Expired