Eleventh-Hour Bulls Charge Twitter, Inc. (TWTR)

Twitter Inc (TWTR) could overtake Yahoo! Inc. (YHOO) in display ad sales this year


Published on Mar 26, 2015 at 11:14 AM
Updated on Apr 20, 2015 at 5:32 PM

Twitter Inc (NYSE:TWTR) is up 1% today to flirt with the half-century $50 mark, after receiving a price-target hike to $58 from $50 at Evercore ISI -- just a day after getting hit with a downgrade. This bullish price action has lured options traders to the table, with calls taking center stage.

Currently, 47,000 calls are on the tape -- nearly triple the expected intraday rate -- compared to just 14,000 puts. Short-term strikes are in high demand, too, per TWTR's 30-day at-the-money implied volatility, which is up 10% at 42.7%.

Looking more closely, eleventh-hour traders are targeting the microblogging stock's weekly 3/27 50-, 51-, and 51.50-strike calls, which are currently TWTR's most active options. Based on a number of factors, it looks like new positions are being purchased at these strikes, as speculators wager on additional upside through tomorrow's close, when the weekly series expires. Put differently, the call buyers need TWTR to muscle north of the respective strikes over the next two sessions.

Call buying has been the strategy of choice over the last two weeks in TWTR's options pits. The security's 10-day call/put volume ratio across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) is 3.68 -- which ranks higher than 96% of all other readings from the past year.

Analysts are less convinced, though, despite the stock's more than 39% year-to-date gain. Almost half of the brokerage firms tracking TWTR have given it a "sell" or worse rating, and the security's average 12-month price target of $53.43 stands at a slim premium to current trading levels. In other words, the equity could be on the verge of additional bullish brokerage notes.

Finally, Twitter Inc (NYSE:TWTR) received some good news on the fundamental front late yesterday. Specifically, market research firm eMarketer said it expects the company to become the third-biggest seller of online display ads this year, displacing Yahoo! Inc. (NASDAQ:YHOO).

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