Twitter Stock Sinks After Elon Musk Pauses Buyout

Put volume is running at double the intraday average

Deputy Editor
May 13, 2022 at 10:26 AM
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The shares of Twitter Inc (NYSE:TWTR) are falling today, last seen down 9.5% to trade at $40.82, following news that Tesla (TSLA) CEO Elon Musk's move to buy the social media company is "temporarily" on hold. Musk is reportedly awaiting accurate numbers concerning fake and spam accounts on the platform.

In addition, today's losses have Twitter stock trading well below Musk's bid of $54.20 per share, with the broader market's selloff creating a $9 billion gap between TWTR's value and Musk's offer. Should these losses continue to gain steam, the security could move back below the $40 level, which acted as a ceiling in March. In addition, shares now sit more than 5% lower for 2022.

Unsurprisingly, bearish activity is picking up in the options pits this morning, with put volume running at double the intraday average. Specifically, 158,000 puts have crossed tape in just the first hour of trading, more than doubling the 87,000 calls traded so far. The most popular is the weekly 5/13 40-strike put, followed by the 40 put in the May series. 

Options traders have favored bearish bets over the last two weeks. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the security sports a 10-day put/call volume ratio of 1.38, which sits higher than all readings from the past year. Echoing this, TWTR's Schaeffer's put/call open interest ratio (SOIR) of 0.85 now stands in the 98th percentile of annual readings. In simpler terms, short-term options traders have rarely been more put-biased.

Options are an attractive route at the moment, per Twitter stock's Schaeffer's Volatility Index (SVI) of 44% that sits in the relatively low 21st percentile of its annual range. This indicates options traders are pricing in extremely low volatility expectations for the time being. What's more, TWTR ranks high on the Schaeffer's Volatility Scorecard (SVS), with a score of 83 out of 100, meaning the security has consistently realized bigger returns than options traders have priced in.


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