Options Traders Eye a Huge Post-Earnings Swing for Twilio Stock

Twilio Inc (TWLO) will report earnings after the close on Wednesday

Feb 6, 2017 at 10:31 AM
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After tomorrow's close, tech firm Twilio Inc (NYSE:TWLO) will report quarterly earnings for the third time since the stock began trading publicly. While the previous two reports give little indication of where the shares could be headed next, TWLO stock is up 0.8% at $31.63 today, and both call and put options are trading at an accelerated pace. While call buyers have had the upper hand lately, that doesn't necessarily mean everyone's bullish.

At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), TWLO has seen 7.47 calls purchased for each put over the past 10 days -- the highest ratio on record for the stock. However, it's possible some recent call buyers are actually short sellers looking to hedge their positions ahead of earnings. After all, nearly 30% of TWLO's total float remains dedicated to short interest.

The brokerage bunch seems optimistic, anyway. Out of 10 analysts tracking TWLO, seven rate the shares a "strong buy," and not one gives the stock a "sell" rating. Plus, the average 12-month price target of $38.10 sits at a healthy premium over current levels.

A look at TWLO's short earnings history reveals mixed results in the session subsequent to reporting. So far, the stock has moved in either direction one time, averaging a 2.2% single-day swing. Options traders seem to be eyeing some dramatic price action for Wednesday, however, currently pricing in a one-day move of 15.8%.

Since it began trading publicly last June, TWLO has been quite a roller coaster on the charts, soaring through late September before quickly shedding nearly all of its gains. In recent months, however, the shares have stabilized, and are now up 9.6% in 2017. Plus, Twilio Inc (NYSE:TWLO) stock finished Friday above the 50-day moving average for the first time in nearly four months.

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