Twitter Accepts Elon Musk Offer, Options Bulls Pile On

Tesla CEO Elon Musk has already secured $46.5 billion in financing

Digital Content Manager
Apr 25, 2022 at 3:06 PM
facebook twitter linkedin


*Update*: Later in the afternoon, Twitter's board accepted Musk's offer of a cash deal at $54.20 per share. Twitter shares have been halted for trading, at last check.

The talk of Wall Street this Monday is social media name Twitter Inc (NYSE: TWTR), which is reportedly approaching a takeover deal with Tesla (TSLA) CEO Elon Musk, who has $46.5 billion in financing secured. Buzz surrounding the deal, which could be announced as soon as this afternoon, had the shares up 5.8% to trade at $51.76, before getting halted.

Options traders have been piling on, with 840,000 calls and 356,000 puts exchanged so far, which is double the volume that is typically seen at this point. By far the most popular is the 4/29 55-strike call, followed by the 52-strike call in the same weekly series, with positions being opened at both.

Today's pop has Twitter stock eyeing its fourth-straight daily win, with support from the 20-day moving average. The shares earlier surged above the $52 level for the first time since their late March rally, which lost steam at the $55 mark before the security found a floor near the $44 region. Year-to-date, TWTR has added 19.3%.

TWTR 20 Day

The stock looks ripe for a decent short squeeze. Though short interest is already down 3.6% over the last two reporting periods, the 38.26 million shares sold short still account for  5.7% of TWTR's available float. Should some of this pessimism begin to unwind, the equity could find the wind at its back.

It's worth noting this deal comes just before the social media name's first-quarter earnings report, which is due out before the open on Thursday, April 28. Twitter stock has a generally negative history of post-earnings reactions, finishing five of eight next-day sessions lower in the last two years, including a 10.8% drop in October. This time around, options traders are pricing in a 9% swing for TWTR, which is smaller than the 9.6% move it averaged following its last eight reports, regardless of direction.  

 




 
Special Offers from Schaeffer's Trading Partners