Rumors Keep Call Buyers Flocking to Twitter, Inc. (TWTR)

Twitter Inc (TWTR) is getting a lift on rumors Google Inc (GOOGL) could make an investment

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Published on Mar 31, 2015 at 10:37 AM
Updated on Jun 24, 2020 at 10:16 AM

Twitter Inc (NYSE:TWTR) is up 1% in early trading at $50.39, amid unsubstantiated rumors that Google Inc (NASDAQ:GOOGL) could make an investment in the microblogging firm. The buzz has piqued the interest of bullish traders, too, as call volume has spiked to 1.8 times the expected intraday rate. By the numbers, 28,000 calls are on the tape so far, compared to fewer than 7,000 puts. Also, based on TWTR's 30-day at-the-money implied volatility -- up 7.5% at 54.4% -- interest in short-term strikes is elevated.

Looking more closely, the weekly 4/2 series of options is extremely popular -- accounting for seven of the 10 most active strikes. Leading the way is the weekly 4/2 50-strike call, where it looks like fresh positions are being purchased, as speculators wager on extended gains above the half-century mark for TWTR through Thursday's close -- when the series expires.

Today's preference for TWTR calls over puts is business as usual. The stock's 10-day call/put volume ratio across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) is 3.22, with long calls more than tripling puts over the last two weeks. What's more, this ratio outranks 84% of comparable readings from the previous year.

However, not everyone's optimistic about Twitter Inc's (NYSE:TWTR) prospects, despite the equity's more than 40% year-to-date lead. Twelve of 26 covering analysts rate the shares a "hold" or worse, and the stock's consensus 12-month price target of $53.83 is just a chip-shot away from current trading levels. This could open the door for a round of upgrades and/or price-target hikes.


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