Dan Passarelli, CEO - Market Taker Mentoring

Today I was watching Twitter, and that's been a really great spectator sport for quite some time now and the game is not over. Elon Musk said that he is pulling out of the deal and he's not going to be buying Twitter because there's way more bots apparently than Twitter said there was. And whatever the reason, he's pulling out of the deal. That brings us to a really interesting situation here at this point.

If the deal ends up not going through, which we'll talk about the other side of that coin in just a moment. Let's just assume for a moment that the deal does not go through. That puts Twitter stock into an interesting and probably precarious position. Because if you look at this chart here, the stock is down to the lows that it was at in the end of February. But if we look at a lot of other stocks in its peer group, let's take Amazon for example here, that stock is way lower than it was back in late February.

If we take Apple, that stock is way lower than it was back in late February. Now those are tech stocks. They're not exactly the same. Let's look at Meta, right, the old Facebook. That stock is way lower than it was back in late February.

So what that says to me is that Twitter, if the deal doesn't go through, is still valued way too high compared to other stocks in a similar boat to them. The risk, arguably (I'm calling a risk because it's the less likely scenario and it would be risk if someone does play the downside) is that when Twitter sues to have the deal go through, that Musk is forced to go through with the deal, which, of course, would put the stock significantly higher. It's a little bit of a dangerous game to play the downside though, the most likely scenario is that it does continue its path lower.

It does have earnings coming out in just a couple of weeks. We've got earning season coming. And the implied volatility, while it's above historical, if we get some of the moves that I think are possible, the implied volatility is fair to maybe even undervalue. This is going to be a great one to watch. Whether it's playing the downside, playing a cheap lottery ticket to the upside, or maybe just playing a straddle, that again is probably about fairly too cheaply priced given the moves that have been happening and that are likely to continue, there is definitely some trade possibility here on Twitter. Hope that helps.