Twitter Inc (TWTR) Option Bulls Root for an End-of-Year Rally

Calls continue to be the options of choice on struggling Twitter Inc

by Karee Venema

Published on Dec 16, 2014 at 12:49 PM
Updated on Apr 20, 2015 at 5:32 PM

Twitter Inc (NYSE:TWTR) is down 1.6%, following a price-target cut to $45 from $55 at Evercore ISI -- although the brokerage firm maintained its "buy" rating. Nevertheless, calls are outpacing puts by a nearly 2-to-1 margin. Meanwhile, the stock's 30-day at-the-money implied volatility is up 1.5% at 49.7%, signaling elevated demand for short-term options.

Seeing the most action in TWTR's options pits today are the December 36 and weekly 12/26 41.50-strike calls. It appears the majority of the 12,887 contracts traded across these two strikes have been bought to open, as traders roll the dice on a quick bounce over the next two weeks.

From a wider sentiment perspective, today's call-skewed session just echoes the withstanding trend. Specifically, the equity's 50-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 2.44 ranks in the 88th annual percentile. Additionally, TWTR's Schaeffer's put/call open interest ratio (SOIR) of 0.60 rests below 75% of similar readings taken in the past year.

Technically speaking, however, Twitter Inc (NYSE:TWTR) has been on a steady downtrend since hitting its most recent high of $55.99 in early October, with the shares off 35.2% to trade at $36.27. Should the shares continue to struggle, a capitulation from option bulls could translate into a fresh wave of selling pressure.


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