Twilio Inc. (TWLO) appeared in our list of compressed stocks this morning. You can see in the time series chart below that TWLO options’ 1-month implied volatility (the lower green line) has never been this low.

When looking at the news to see if there was a reason for the low volatility expectations, the most recent news stories on the company came from 7 days ago when the company reported earnings, then nothing. It’s like investors and the media have just forgotten about TWLO since the earnings report.

This MDM Graph compares the modeled expectations of current options prices (the orange line) to the actual distribution of stock prices over the last year (the blue histogram). You can see in the chart that TWLO made big moves much more frequently than the modeled options prices expect.  Straddle buyers love to see those fat tails on either side of this graph!

This Volatility Cone compares implied volatility expectations (the yellow dots) to historical volatilities over the past year. To learn more about the Volatility Cone, click here. Expectations at every term are closer to the extremely low historical volatility than the average. This confirms that TWLO options are very inexpensive.

The Volatility Term Structure shows that options expiring on June 21st have the best combination of low implied volatility and good liquidity. To learn more about Volatility Term Structure, click here.

TWLO share prices are compressed and volatility expectations have never been this low. Relatively speaking, that means TWLO options are as inexpensive as they have ever been.

Buy Low, Sell High. That’s the economic law of profits. This is certainly an option buying opportunity.

Be sure to read the ODDS Online Daily Trade Idea report to get the details of our trade ideas for TWLO.

To access Odds Online Daily, click here.

Thank you,

Don Fishback