Twitter Inc (TWTR) Bounces Despite Buyout Buzzkill

SunTrust Robinson and S&P Global both have their doubts about the most recent Twitter Inc (TWTR) buyout rumors

by Alex Eppstein

Published on Aug 4, 2016 at 10:44 AM

While Jack Dorsey's "other company" soars on earnings, Twitter Inc (NYSE:TWTR) is up a more modest 1% at $17.80, just a day after exploding on buyout rumors. However, as with this biotech, it appears a TWTR acquisition is far from guaranteed. Specifically, SunTrust Robinson said a takeover by Saudi Prince Alwaleed bin Talal or former Microsoft Corporation (NASDAQ:MSFT) CEO Steve Ballmer is "extremely unlikely" -- and this skeptical sentiment was echoed by S&P Global.

Speaking of skepticism, short-term options traders are very put-skewed on TWTR. While the social media stock's Schaeffer's put/call open interest ratio (SOIR) of 0.67 indicates calls outstrip puts on an absolute basis -- among options expiring in the next three months -- this reading ranks in the high 79th percentile of its annual range. In other words, on a relative basis, short-term traders have rarely been so focused on puts over calls.

For instance, during the past 10 sessions, TWTR's back-month September 20 call and September 14 put have both seen huge increases in open interest -- adding 14,654 and 10,812 contracts, respectively. According to data at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), a huge portion of the calls have been bought to open, suggesting traders foresee TWTR topple the round $20 mark by the close on Friday, Sept. 16. By contrast, sell-to-open activity has dominated the put, suggesting speculators foresee the $14 area acting as near-term support.

Technically speaking, Twitter Inc (NYSE:TWTR) hasn't closed north of $20 since early January. At the same time, the social media stock has never settled a session south of $14, though it did breach this level on May 24 -- the same day the shares touched their record low of $13.73.

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