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Option Brief: Option traders continue to show a preference for calls over puts in Twitter Inc's (NYSE:TWTR) options pits, despite the stock's mind-numbing 52% year-to-date retreat. By the numbers, roughly 24,000 calls have changed hands on TWTR today, compared to about 17,000 puts. Although the equity has shed 2.1% in early trading to churn near $30.86, a number of speculators are keeping the faith on a quick move higher by session's end.
Specifically, the most active option thus far is TWTR's weekly 5/23 31.50-strike call, where 8,789 contracts have traded -- 73% at the ask price, hinting at buyer-driven activity. Plus, volume handily outstrips open interest, making it safe to assume that new positions are being initiated.
By purchasing the out-of-the-money calls for a volume-weighted average price (VWAP) of $0.19, the traders will realize a profit if TWTR is sitting above $31.69 (strike plus VWAP) at tonight's close. Past this breakeven mark, profits are theoretically unlimited. Should TWTR expire south of the strike price, however, the most the speculators stand to lose is the initial cash outlay.
As touched upon, TWTR has vastly underperformed throughout 2014. More recently, the equity has encountered a stiff layer of technical resistance at its 10-day moving average -- currently located at $32.32. Off the charts, a CNBC tweet yesterday speculated that Carl Icahn is not planning on taking a stake in the company. Separately, rumors are circulating that Twitter Inc (NYSE:TWTR) is experimenting with video sharing. Finally, overseas, Russian President Vladimir Putin said earlier today he does not plan to impose restrictions on the microblogging site or its sector peer, Facebook Inc (NASDAQ:FB).