Most Active Options: Twitter Inc and Amazon.com, Inc.

Option buyers are paying up to bet on Twitter Inc (TWTR) and Amazon.com, Inc. (AMZN)

by Andrea Kramer

Published on Jan 26, 2016 at 1:36 PM

The 20 stocks listed in the table below have attracted the highest total options volume during the past 10 trading days. Stocks highlighted are new to the list since the last time the study was run, and data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White. Two notable names are microblogging concern Twitter Inc (NYSE:TWTR) and mega e-tailer Amazon.com, Inc. (NASDAQ:AMZN).

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TWTR is down 0.9% at $17.17, after naming a new chief marketing officer a day after four Twitter execs hit the bricks. Goldman Sachs said that continued management turnover further boosts execution risks for TWTR, slicing its price target on the stock to $28 from $40. Moffett Nathanson also cut its price target, to $23 from $29.

TWTR has been swimming in red ink since bumping up against the $52 region, and touched a record low of $15.48 just last week. Still, option buyers have picked up bullish bets over bearish at a faster-than-usual clip. During the past 10 weeks on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), TWTR has racked up a 50-day call/put volume ratio of 3.11 -- higher than 94% of all other readings from the past year.

During the past two weeks, the deep out-of-the-money June 25 call has seen a notable open interest increase, with close to 12,000 contracts added. More than half of the calls were bought to open, suggesting buyers are gambling on a rebound north of $25 by June options expiration. However, considering that more than 10% of TWTR's float is dedicated to short interest, it's possible that shorts were picking up calls to hedge their bearish bets.

Whatever the motive, near-term traders are paying a relatively healthy premium to speculate on Twitter Inc (NYSE:TWTR). The stock's Schaeffer's Volatility Index (SVI) of 95% is in the 94th percentile of its annual range, pointing to historically high volatility expectations.

AMZN has also been a favorite among call buyers, with speculators likely betting on an earnings win. Amazon.com is set to report fourth-quarter earnings after the close on Thursday, and the stock has enjoyed a positive earnings reaction after its last four reports.

On the ISE, CBOE, and PHLX, AMZN sports a 10-day call/put volume ratio of 1.40 -- above 95% of all other readings from the past 12 months. What's more, AMZN's SVI is docked at an annual high of 53% ahead of earnings.

The weekly 1/29 600-strike call has been popular, with close to 1,900 contracts added during the past two weeks. A healthy portion of the calls were bought to open, meaning traders are likely expecting a post-earnings surge north of $600 on Friday -- when the weekly options expire.

Along with the rest of the broader equities market, 2016 started out rough for Amazon.com, Inc. (NASDAQ:AMZN). However, the stock bounced off its 32-week moving average, and was last seen trading 0.7% higher at $600.53.


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