Twitter Inc (TWTR) Options Buyers Find a Fire Sale

Low volatility expectations are currently priced into Twitter Inc's (NYSE:TWTR) near-term options, a potential boon to premium buyers

Dec 29, 2016 at 11:23 AM
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Options traders have been blasting Twitter Inc (NYSE:TWTR) in recent weeks, per data from Schaeffer's Senior Quantitative Analyst Rocky White. In fact, TWTR stock has seen some of the highest options volume over the past 10 trading sessions, with speculative players showing a preference for calls over puts. Specifically, 381,191 calls have traded on TWTR stock in the last two weeks, compared to 207,243 puts.

Narrowing the scope to focus on calls that were bought to open across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) highlights a bullish tilt. In fact, over the past 10 days, traders have bought to open 88,817 calls on the major options exchanges, versus 24,216 puts. What's more, the resultant 10-day call/put volume ratio of 3.67 ranks in the 66th annual percentile, suggesting a bigger-than-usual appetite for long calls relative to puts.

As such, TWTR's Schaeffer's put/call open interest ratio (SOIR) is docked at 0.43. Not only does this indicate that calls more than double puts among options set to expire in three months or less, but it ranks below 89% of all comparable readings taken in the past year. Simply stated, short-term speculators are more call-heavy than usual toward TWTR stock.

It's certainly a prime time for options buyers to strike on TWTR, too, considering low volatility expectations are currently priced into the stock's near-term options -- a potential boon to premium buyers. For starters, the equity's Schaeffer's Volatility Index (SVI) of 40% is perched lower than 99% of all similar readings taken in the last 12 months. Plus, its 30-day at-the-money implied volatility of 43.2% ranks in the 8th percentile of its annual range.

Technically, TWTR has turned in an uninspiring performance in 2016, shedding nearly 29%. More recently, the shares of Twitter Inc (NYSE:TWTR) are down roughly 10% since falling south of $18 -- a level that's served as both support and resistance throughout 2016 -- on Dec. 20, and narrowly avoided logging their longest losing streak since January. Today, however, the stock is up 0.3% at $16.45 after Twitter's Periscope livestreaming service announced 360-degree live-video capability.

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