Twitter Calls Hot on Buyout Buzz, CEO Speculation

Twitter Inc (NYSE:TWTR) is on track for its biggest one-day percentage gain since late March

Jun 30, 2015 at 2:48 PM
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Rumors are swirling as to what could be the catalyst behind today's Twitter Inc (NYSE:TWTR) rally, which has the stock up 5.1% at $35.96 -- and on track for its biggest one-day percentage gain since late March. Some are speculating the company could be a potential takeover target, while others are tossing around the idea that a new CEO could be announced -- just weeks after Dick Costolo resigned from the position. Regardless, the move has prompted a rush of call activity in the equity's options pits, with the contracts crossing the tape at two times the average intraday rate -- and outpacing puts by a 4-to-1 margin.

It appears a number of traders are betting on TWTR to close out the holiday-shortened week on a high note, and are buying to open the equity's weekly 7/2 35-, 35.50-, 36-, and 36.50-strike calls. Other speculators are giving the security a little more time to extend today's rally, and appear to be purchasing new positions at the July 37, 37.50, and 40 calls. These front-month options will expire at the close on Friday, July 17.

Widening the sentiment scope reveals call buyers have been active in recent months. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), TWTR's 50-day call/put volume ratio of 2.66 ranks in the 73rd annual percentile. In other words, calls have been bought to open over puts at a faster-than-usual clip.

Elsewhere on the Street, though, sentiment is more mixed toward Twitter Inc (NYSE:TWTR). Of the 25 brokerage firms covering the shares, 14 maintain a lukewarm "hold" recommendation. Meanwhile, the average 12-month price target of $46.07 stands at a 28% premium to the stock's current perch.

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