Pre-Earnings Optimism Runs High on Twitter, Inc. (TWTR)

Twitter Inc (TWTR) options traders have shown a strong preference for calls over puts

by Alex Eppstein

Published on Feb 4, 2015 at 12:12 PM
Updated on Jun 24, 2020 at 10:16 AM

Calls have been the options of choice on Twitter Inc (NYSE:TWTR) lately. During the last 10 weeks at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), 2.5 calls have been bought to open for every put -- a pace that outstrips 88% of all similar readings from the past year.

In like manner, TWTR's Schaeffer's put/call open interest ratio (SOIR) of 0.62 ranks in the 35th percentile of its annual range. Put differently, short-term traders have displayed an unusually strong affinity for calls over puts, among options set to expire within the next three months. Over the past 10 sessions, in fact, open interest at the near-the-money 40 strike has added roughly 4,400 positions -- more than any other strike.

Sentiment is more divided among the brokerage crowd. Of the 26 analysts following TWTR, half rate it a "strong buy," while the other half have handed out either a "hold" or "strong sell" recommendation. Meanwhile, the stock's consensus 12-month price target of $50.06 stands at a 23.8% premium to current trading levels, and in territory not explored since late October. This morning, in fact, Monness Crespi Hardt boosted its price target to $44 from $40, while reiterating a "neutral" rating.

On the heels of this positive note, TWTR is 1.6% higher at $40.42 -- adding to yesterday's news-induced gains -- and is now testing resistance at its descending 80-day moving average. Longer term, though, the stock is a laggard, dropping nearly 28% since its Oct. 9 high of $55.99.

Finally, Twitter Inc (NYSE:TWTR) will release fourth-quarter earnings after tomorrow's close. The shares tend to move sharply in the immediate aftermath of these events, swinging 15.6% on average in the session following the last four quarterly reports -- with all but one move to the downside.

Daily Chart of TWTR since October 2014 with 80-Day Moving Average


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