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Option Brief: Twitter Inc (NYSE:TWTR) call volume ran at a more than 21% mark-up to its typical daily average pace yesterday. One of the more active options was the deep out-of-the-money (OTM) January 2014 85-strike call, where 9,442 contracts changed hands during the course of the session.
Open interest at that strike spiked by 4,646 contracts overnight, suggesting new positions were created. What's more, 72% of the calls traded off the ask, hinting at buyer-driven activity. In other words, Thursday saw the initiation of long call positions.
Simply stated, yesterday's call buyers are looking for TWTR shares to mount a steep advance by the closing bell on Friday, Jan. 17. Specifically, they need shares of the microblogging company to topple the 85 strike by options expiration -- a nearly 23% gain from its current perch at $69.15. At last check, delta on the call was hovering near 0.21, denoting a more than 1-in-5 chance of an in-the-money finish. No matter what happens, however, the most the traders can lose is 100% of the premium paid.
It's possible that another strategy is at play here, as well. Given the deep OTM status of the aforementioned option, as well as the fact that short interest on TWTR has ballooned to over 8% of its available float, a portion of yesterday's call buying may have been the work of short sellers hedging their bearish bets in the near term.
From a technical perspective, Twitter Inc (NYSE:TWTR) has been on a tear since going public in early November, with the shares up more than 50%. Just last week, the stock touched an all-time high of $74.73.