Twitter, Inc. (TWTR) Option Bulls Bet On a Bigger Bounce

Calls continue to be the options of choice on Twitter Inc (NYSE:TWTR)

by Karee Venema

Published on May 6, 2015 at 2:02 PM

Traders have shown a distinct preference for long calls over puts in Twitter Inc's (NYSE:TWTR) options pits of late. Specifically, at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock sports a top-heavy 50-day call/put volume ratio of 2.78. What's more, this ratio ranks in the 90th percentile of its annual range, meaning calls have been bought to open over puts at a near-annual-high clip in recent months.

In today's session, calls are outpacing puts by a more than 2-to-1 ratio. The equity's May 37 call is one of the more active options, and it looks as if new positions are being purchased -- a theory echoed by data from the ISE. In other words, speculators are rolling the dice on TWTR to extend its lead north of $37 through next Friday's close, when front-month options expire.

Regardless of where TWTR settles next week, today's call buyers can rest easy knowing they placed their bullish bets at a relative bargain. In fact, since April 27 -- the day before the company's earnings were prematurely released -- TWTR's Schaeffer's Volatility Index (SVI) has dropped to 42% from 68%. Additionally, the current SVI rests lower than 84% of similar readings taken in the past year, meaning premium on the equity's front-month options is, historically speaking, pricing in low volatility expectations.

Technically speaking, it's been a rough road for Twitter Inc (NYSE:TWTR) since it's earnings report hit the newswires on Tuesday, April 28. In fact, since its April 27 close at $51.66, the shares have surrendered 39%. Today, the stock is up 0.3% at $37.52, but considering TWTR's Relative Strength Index (RSI) of 21 is sitting deep in oversold territory, a near-term bounce may have been in the cards.

A Schaeffer's exclusive!

The Expert's Guide

Access your FREE trading earning announcements before it's too late!



NEW! Explore Schaeffer’s Partners' deals and get connected to top online brokerages with deals tailored exclusively for our readers.  Get answers to your questions regarding transfer fees, commission rates, programs and available discounts related to online trading services.

MORE | MARKETstories

Look Who's Going Bankrupt Next in America
Porter Stansberry is making a concerning prediction.
Apparel Name Boosted By Earnings Beat
Three analysts have moved their price targets down to $60
Black & Decker Withdraws 2020 Guidance, Cuts Non-Essential Staff
Black & Decker said it would reduce any non-essential staff and decided to withdraw its 2020 forecast
Look Who's Going Bankrupt Next in America
Porter Stansberry is making a concerning prediction.