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Twitter Inc (TWTR) Swoon Dampens Bullish Hopes

Yesterday's weekly call buyers probably aren't happy with Twitter Inc this morning

by 7/8/2014 10:56 AM
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As usual, Twitter Inc (NYSE:TWTR) call volume handily outstripped put volume yesterday. What's more, the microblogging stock's 30-day at-the-money implied volatility popped 4.3% to close at 65.6%, signaling elevated demand for short-term options.

Along those lines, TWTR's weekly 7/11 41-strike call saw significant demand -- in fact, more than 7,200 contracts traded here, the second most of any strike. A sizable amount crossed at the ask price, and open interest rose here more than any other strike overnight, collectively suggesting buy-to-open activity.

In a nutshell, the traders expect the shares to rally past breakeven at $41.63 -- or the strike price plus the volume-weighted average price of $0.63 -- by this Friday's close, when the weekly options expire. Gains are theoretically unlimited north of breakeven, while the most the buyers have on the line is the initial premium paid, should TWTR end the week south of the strike.

Yesterday's speculators can't be happy with what they're seeing today, however, with Twitter Inc (NYSE:TWTR) off 7.1% to $37.37. As such, delta for the out-of-the-money calls has dropped to 0.067 from 0.36 at Monday's close.


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