Twitter is breaking out, and we could see more gains ahead 

Twitter has soared 88 percent year to date, and Todd Gordon of TradingAnalysis.com says the social media giant is poised for an even bigger breakout when it reports earnings later this month.

“Twitter’s had an amazing comeback here,” he said Thursday on CNBC’s “Trading Nation.” “We’re heading into earnings on July 27, so I want to put an options trade on for that earnings report.”

Looking at a chart of the social giant, Gordon noted that despite the surge this year, the stock has been in a consolidation phase since hitting a multiyear high in June. However, after it's churned sideways for the last month, the trader says, any move higher could send the stock back to its 2015 high in the $50 range.

To play for a rally in Twitter, Gordon turned to the options market. But because earnings are just around the corner, the implied volatility, or the price of options on the stock, are elevated. So rather than buy call options, Gordon decided to get long via a put credit spread.

Gordon is selling the July 27 weekly 45-strike put and buying the July 27 weekly 40-strike put for a credit of $1.95, meaning that if Twitter closes above $45 on July 27 expiration, the trader would keep the $195 credit as his reward. But should Twitter close below $40 on that day, he could lose $305.

However, shares of Twitter are already trading just above $45, meaning that the stock simply needs to stay above the level for Gordon to make the maximum reward.

The trade: Gordon is suggesting selling the July 27 weekly 45/40 put spread in TWTR for about $1.95 credit.

Bottom line: Gordon sees TWTR rallying above $45 on July 27 expiration.

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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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