Options Radar: Twitter Inc, Yahoo! Inc., and Transocean LTD

Reviewing notable options activity on Twitter Inc, Yahoo! Inc., and Transocean LTD

Dec 8, 2014 at 2:27 PM
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The major market indexes are in the red this afternoon, pulling back from Friday's record highs. Among the equities south of breakeven are microblogging pioneer Twitter Inc (NYSE:TWTR), Internet titan Yahoo! Inc. (NASDAQ:YHOO), and offshore drilling concern Transocean LTD (NYSE:RIG). In the options pits, here's a look at how speculators have been placing their bets on TWTR, YHOO, and RIG.

  • Twitter Inc (NYSE:TWTR) is 5.9% lower at $36.21, steepening its year-to-date deficit to more than 43%. The shares are now exploring territory not charted since mid-July, as traders continue to digest projections for lost ground in the mobile ad war with YHOO, and news of an executive departure -- both of which hit the Street late last week. Nevertheless, options players continue to bet on a bounce, with intraday call volume more than doubling put volume, and running at an accelerated clip compared to normal levels. The stock's 30-day at-the-money (ATM) implied volatility (IV) has jumped 11.4% to 43.7%, reflecting a growing affinity for near-term options, with buy-to-open activity detected at the December 37 call. By purchasing the calls to open, the traders expect TWTR to climb back atop $37 within the next couple of weeks. In light of today's price action, though, delta on the call has dropped to 0.39 from 0.71 at Friday's close, indicating decreased odds of the option expiring in the money on Friday, Dec. 19.

  • Yahoo! Inc. (NASDAQ:YHOO) has shed 2.5% to linger near $49.74, but remains roughly 23% higher for 2014. YHOO calls are outpacing puts by a margin of more than 4-to-1 this afternoon, and the stock's 30-day ATM IV was last seen 7.7% higher at 28%, as short-term options are especially popular. In fact, among the most active options is the weekly 12/12 52-strike call, where more than 10,000 contracts have traded -- primarily on the ask side, suggesting they were bought. Plus, IV has popped 8.8 percentage points at the strike, hinting at new positions. By purchasing the calls to open, the buyers expect YHOO to resume its long-term uptrend and reclaim a perch atop $52 -- and possibly explore new decade-plus highs -- by this Friday's close.

  • Finally, Transocean LTD (NYSE:RIG) has swallowed a 4.3% loss to sit at $17.92, and earlier touched a new 19-year low of $17.75. Along with crude oil's continued plunge, RIG is suffering after receiving another bearish brokerage note, this time courtesy of Cowen and Company, which sliced its price target to $20 from $27. The equity's 30-day ATM IV hit a 52-week peak in early trading, and was last seen 16.8% higher at 65.6%. Intraday put volume is running at twice the pace of call volume, with apparent buy-to-open activity spotted at the January 2015 18-strike put. By purchasing the puts to open, the buyers expect RIG to extend its journey into new-low territory through the next couple of months. Delta on the put sits at negative 0.47, compared to negative 0.39 at the end of last week, suggesting a nearly 1-in-2 shot of the option expiring in the money on Friday, Jan. 16.

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