Hello everyone,
Currently Hostess Brands Inc is trending upwards and might break out. It looks like a buy with little downside risk and lots of upwards potential. The following reasons are why I think throwing some loose cash into $TWNK is a good idea.
Thesis: Upwards Potential.
$TWNK is trending upwards on a 1 day chart. There was no massive upwards pop in January that would indicate a pairs trade between $GME and $TWNK, as such $TWNK is acting alone currently. This is a good thing as I believe that $TWNK will form a pairs trade with other tier 2 WSB stock’s such as $TR, which is also a candy stock.
$TWNK is trending upwards. Notice the volume spike once WallStreetBets got ahold of it but the relatively sideways action. Due to this sideways trend but increase in volume implied volatility on $TWNK’s option chain has decreased and currently you can get a “leap” option contract (222 days to EXP) for around .75 a contract ($75).
I only really recommend leap options or shares on these plays because then you have plenty of time until a gap up happens. Because of this you will only be risking $75 to make around $500, assuming $TWNK gaps up and the IV drastically increases.
Holding shares is less risky as you place a stop at around $15.50.
Conclusion
$TWNK demonstrates an interesting opportunity currently. There is not much downside at the moment and the upside is massive.
If I decide to take a position I will either take the long term LEAP options for the $30 strike price and hope for an increase in IV or I will play it safe and buy some shares.
