Extra: $TWTR investment
you can lose a lot of money blindly copying other investors. this is not investment advice.
a Regulatory Note: the Newslettr does a moderate amount of vetting of messages relating to financial investments. they are never sent during market hours 9:30AM to 4:00PM New York time. the Newslettr has verified this message is from a former Google employee who has never been a Twitter employee, but cannot guarantee whether the advice will be beneficial or profitable to those who consider it.
and also, an Important Note: there is a difference between investing and betting.
An investment is a purchase of part of a company — one that you expect to hold for years without selling. the Newslettr recommends that anyone with more than about $10,000 in savings look into investing — starting with an S&P 500 index fund.
A bet is a gamble that you expect to hold for less than a year. Only make bets when you are confident the market price is wrong. If you don’t know what you are doing when you are betting, you can easily lose money that you can’t afford to lose.
Stock options are always “bets”. And before you buy options, always ask yourself “who is selling them”?
a Message from a former Google employee:
Elon Musk isn’t stupid.
He is buying in to Twitter because he knows the company can be worth twice what it is now with some minor changes. Based on my experience at Google, and after reading Elon’s recent tweets (as well as those of various Twitter employees, such as the CEO), I expect at least two substantial changes to be announced and launched before the end of June.
My price target for June 30th is $90 per share, with the 5th to 95th percentile range between $40 and $200. This is an extraordinary amount of volatility.
We have purchased 1000 options1 contracts, expiration 15 July 2022, at a strike price of US$100 per share. The total purchase price was around $40,000.
This message gives the Newslettr an opportunity to discuss a few terminology issues related to stock options.
An “options contract” has a quoted price in terms of dollars-per-share, but one options contract corresponds to 100 shares. So, 1000 options contracts will allow a person to purchase 100000 shares in Twitter.2 One can describe this in monetary terms as “$40,000 of options”, but it sounds flashier to say “$5 million in options”. (the current share price being roughly $50 per share).
If the stock price is at $40 per share at the end of June, the options will be worthless.
If the stock price is at $90 per share at the end of June, the options will be worth something. Some of you enjoy doing statistical modeling in spreadsheets. If you do, please keep your math to yourself. Let’s just say our friend could make half a million dollars.
If the stock price is at $200 per share at the end of June, the options will be worth around $100 per share. One can exercise the options and then immediately sell the stock for a $100 per share profit. This would be a profit of $10 million.
It is unlikely that the price reaches $200 per share by the end of June. Elon Musk is smart, but he’s not a magician. Don’t bet the farm.
These are “call” options - an option (but not an obligation) to buy the stock. There are also “put” options which give an option (but not an obligation) to sell the stock at a specific price. If you didn’t already know this, DO NOT BUY OPTIONS.
These are “American” options. They can be exercised on-or-before the expiration date. Other options can only be exercised on the expiration date.