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Most Active Options Update: Twitter Inc (TWTR)

Short-term contracts are in high demand in Twitter Inc's options pits today

by 5/30/2014 1:58 PM
Stocks quoted in this article:

The 20 stocks listed in the table below have attracted the highest total options volume during the past 10 trading days. Names highlighted are new to the list since the last time the study was run, and data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White. One name of notable interest this afternoon is Twitter Inc (NYSE:TWTR).


Twitter Inc option volume is slightly accelerated on both the call and the put side this afternoon. Short-term options are in high demand, per the equity's 30-day at-the-money implied volatility (IV), which is up 5.4% to 49.8%. Although TWTR has resumed its longer-term downtrend today -- the stock was off more than 5% at last check to churn near $32.27 -- speculators are split on their near-term forecast for the microblogging name.

The most active option thus far is TWTR's weekly 5/30 32.50-strike call, where 10,686 contracts have changed hands. According to data from the International Securities Exchange (ISE), this near-the-money strike has seen a mix of buy- and sell-to-open activity in today's trading. Those buying to open the calls expect TWTR to muscle back above the $32.50 mark by session's end, while those selling to open the contracts are betting on the equity to expire south of $32.50 at tonight's close.

Also on the call side, TWTR's weekly 6/6 33 strike received notable attention from one trader in particular, who scooped up a block of 2,075 contracts earlier today at an ask price of $0.90 apiece. Breakeven at next Friday's close is $33.90 (strike plus premium paid), and gains will accrue with each additional step above this mark TWTR is sitting at expiration. Risk, meanwhile, is limited to the initial cash outlay of $186,750 (number of contracts * premium paid * 100 contracts per share), should TWTR settle south of the strike price at week's end.

A number of put players, meanwhile, are betting on additional downside for TWTR over the next week. The most sought-after put is the weekly 6/6 32.50 strike, where nearly 7,000 contracts have changed hands -- mostly on the ask side, pointing to buyer-driven activity. Plus, IV is higher at the strike, and volume outstrips open interest, making it safe to assume that new positions are being initiated.

At-expiration breakeven for the puts is $31.79, which is the strike less the volume-weighted average price (VWAP) of $0.71. A finish south of this mark will result in a profit for the speculators -- with gains accumulating on a move all the way down to zero. As with the call buyers, though, the most these put buyers stand to lose is 100% of the premium paid, if TWTR expires north of the 32.50 strike price.

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