Twitter Inc (TWTR) Layoffs Provoke Burst in Bullish Betting

Twitter Inc (TWTR) will cut 8% of its global workforce

Oct 13, 2015 at 10:57 AM
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Twitter Inc (NYSE:TWTR) is a long-term laggard, but the stock is bucking the trend this morning -- up 4.9% at $30.17. The pop follows CEO Jack Dorsey's confirmation that the company will lay off 8% of its global workforce, confirming earlier speculation. Adding to the bullish bias, TWTR says it expects third-quarter revenue to come in at or above the high end of its forecast range. All of this early action has provoked heightened speculation in the stock's options pits.

Diving right in, TWTR calls are crossing at almost triple the usual intraday rate. The two most active strikes are the October 30 and 31 calls, and it seems as though new positions are being purchased. If this is the case, the traders are confident the shares will settle this Friday's close -- when front-month contracts expire -- above the respective strikes, or risk losing the initial premium paid.

This preference for short-term calls is pretty unusual. TWTR's Schaeffer's put/call open interest ratio (SOIR) registers at an annual high of 1.02, meaning put open interest outweighs call open interest by the widest margin seen in the past year, among options with a shelf-life of three months or less.

Skepticism isn't restricted to option players, either. During the last two reporting periods, short interest increased more than 19%, and now nearly 8% of TWTR's float is sold short.

There's a reason for that -- as alluded to, Twitter Inc (NYSE:TWTR) has struggled on the charts, today's gains notwithstanding. In fact, as of last night's close, the shares were down over 40% year-over-year. And while it may look like the stock is breaking out, TWTR's upside move this morning has been contained by its 80-day moving average.

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