Latest Twitter, Inc. (TWTR) News Excites Options Bears

Twitter Inc (TWTR) is rumored to have purchased a startup company

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Published on Mar 10, 2015 at 11:14 AM
Updated on Apr 20, 2015 at 5:32 PM

Twitter Inc (NYSE:TWTR) is down 2.4% today at $46.47, after reportedly paying $100 million to purchase Periscope, a startup company which has been working on a live-video streaming application. Also on the fundamental front, TWTR announced it has opened its first offices in Hong Kong. Amid today's developments, puts are being targeted more than usual, with the contracts trading at a 78% mark-up to the normal intraday pace.

The most popular TWTR contract today is the weekly 3/13 44.50-strike, which traders are purchasing in hopes the shares will fall below $44.50 by the close this Friday, when the contracts expire. While the delta on the option has moved to negative 0.18 from negative 0.076 at yesterday's close -- indicating an increased probability the underlying will be sitting south of $44.50 Friday night -- the current odds still show a less than 1-in-5 chance the contracts will move into the money at expiration.

Put buying has been a rare sight in TWTR's options pits. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have bought to open 3.48 calls for every put during the past two weeks. The resultant 10-day call/put volume ratio of 3.48 is higher than 92% of all such readings from the past year.

Daily Chart of TWTR since December 2014 with 10-day and 20-day moving averages

Thanks to a post-earnings bull gap in early February, Twitter Inc (NYSE:TWTR) has a year-to-date lead of roughly 30%. However, the shares have been moving lower since meeting resistance at the round-number $50 mark late last month, and could now be facing overhead pressure from their 10- and 20-day moving averages.


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