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
Updated on Jun 24, 2020 at 10:16 AM

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.

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