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Option Brief: With the shares spiking more than 6% on an early morning bullish brokerage note from Morgan Stanley, Twitter Inc (NYSE:TWTR) call volume at midday is running at nearly three times the expected intraday rate. By the numbers, about 100,000 contracts are on the tape, compared to 60,000 puts.
Most active are a trio of TWTR calls expiring at the close tomorrow. In the lead is the microblogging site's in-the-money weekly 5/9 32-strike call, where more than 11,700 contracts have traded -- a healthy portion at the ask price, suggesting they were purchased. Also, implied volatility spiked on several mid-sized blocks at the strike, and volume edges out open interest, conveying buy-to-open activity. In other words, these traders are anticipating TWTR will continue to move north from its current perch at $32.58, through the closing bell tomorrow.
Based on the aforementioned call's volume-weighted average price (VWAP) of $0.71, breakeven on the transaction is $32.71 (strike plus VWAP). Alternatively, if the stock dips back below the strike price and the call finishes out of the money tomorrow night, traders still holding onto the Twitter Inc (NYSE:TWTR) contracts will forfeit the initial premium paid.