At first glance, software specialist Twilio (TWLO) — which is best known for its focus on communication APIs — would seem to be a compelling opportunity, despite the threat that China’s DeepSeek algorithm imposed on the broader tech ecosystem. Unlike many of its peers, TWLO stock has gained over 32% of value in the past five sessions, a beneficiary of optimistic implications behind its investor day conference.

Last week, management disclosed its strategic framework, noting in particular a focus on profits. While the company will strive for double-digit revenue growth through 2027, it will prioritize expanding adjusted operating margins from 16% last year to between 21% and 22% in 2027. Further, the leadership team forecasted $3 billion in cumulative free cash flow from 2025 to 2027, with at least 50% returned to shareholders via buybacks.

One other catalyst also buoyed sentiment for TWLO stock: tailwinds associated with artificial intelligence. Management noted that 90% of Fortune 50 AI startups, along with the machine intelligence juggernaut OpenAI, use Twilio’s platform. All told, this advanced innovation has contributed to $260 million in revenue generation so far.

With fundamental enthusiasm sparking technical momentum, it wasn’t surprising to see TWLO stock represent a highlight among the individual names listed on Barchart Screeners, specifically under the category "Top Tech Stocks." This screener focuses on computer and tech sector securities making recent new six-month highs.

Primarily, it’s not uncommon for FOMO or the fear of missing out to drive up already-hot names like TWLO stock. However, those who believe that Twilio is immune to the DeepSeek threat should think twice.

It’s not a direct threat, to be sure. Nevertheless, arguably the biggest storm cloud that DeepSeek represents is the fragmentation of AI platforms. If the AI landscape fractures into regional or proprietary ecosystems, Twilio could struggle to maintain seamless integrations across multiple AI providers. Further, a shift away from OpenAI could kill the golden goose.

Lack of Directional Confidence Warrants a Special Approach for TWLO Stock

Despite certain risk factors affecting TWLO stock, investors are likely to view the underlying business as a long-term upside opportunity. Currently, the Barchart Technical Opinion indicator rates TWLO as a 100% Strong Buy. In addition, the security enjoys a Moderate Buy consensus view among 26 experts, of which only two have issued outright Sell recommendations.

Still, the empirical data doesn’t justify an aggressive directional wager. When pricing data for TWLO stock is viewed stochastically — devoid of any other context aside from the temporal — the software specialist tends to have a neutral to negative bias. On a week-to-week basis, a position entered at the beginning of the period has a 51.92% chance of rising by the end of it. On a four-week basis, the odds decline to 48.64%.

Of course, the market can respond with greater vigor based on abnormal fluctuations of the fear-greed continuum. For example, last business week, TWLO stock gained just under 20%. Under dynamic conditions when TWLO gains double-digit percentage points over a one-week period, by the end of the fourth subsequent week, the odds of a long position being profitable is exactly 50/50.

It’s an improvement over 48.64% but that’s just a pedantically mathematical observation. From a strategic standpoint, there’s no incentive to wager heavily on a directional outcome. Instead, the only “certainty” that exists is the likelihood of movement. Under dynamic conditions, the median return over a four-week period (for positive outcomes) is 23.22%, while the median loss under negative outcomes is 13.91%.

In a little over two weeks, Twilio is scheduled to release its fourth-quarter earnings report. There’s likely to be significant activity. The only question is the ultimate direction. With this uncertainty in mind, investors may be incentivized to consider a long iron condor.

A combination of a bull call spread and bear put spread, the long iron condor essentially establishes north and south endzones. Therefore, it doesn’t matter where the ball ends up, so long as it crosses either profitability threshold.

Since the empirical data suggests that, at best, we’re looking at a 50/50 bet for wagers aligning with the options chain expiring Feb. 21, a condor trade — as opposed to a directional bull or bear spread — makes logical sense.

Plotting an Effective Iron Condor Strategy

A key characteristic of iron condors — whether of the long or short variety — is complexity. Due to the combination of two vertical spreads, the number of mathematically viable condors can be overwhelming at times. However, with the market intelligence above, we can simplify the strategizing process.

As stated earlier, over the next four weeks following the anchor event (a week characterized by abnormal upside), there’s a strong possibility that TWLO stock could either rise by 23.22% or fall by 13.91%. From last Friday’s closing price of $136.23, TWLO could potentially hit a high of $167.86 or drop to a low of $117.28.

With that in mind, jittery traders that still want to trade TWLO stock may consider for the options chain expiring Feb. 21 the 120P | 125P || 145C | 150C long iron condor, or the combo of the 120/125 bear put spread and the 145/150 bull call spread. In this transaction, the speculator risks $376 for the chance to earn a maximum payout of $124.

No, a payout of 33% isn’t all that exciting, I agree. It’s expensive because there are two premiums to be paid. The thing is, the lack of directional certainty with TWLO stock arguably makes the double premium worth paying.