Bulls Watch As Twitter Inc, Fitbit Inc Descend to New Lows

Call buying has remained the strategy of choice on Twitter Inc (NYSE:TWTR) and Fitbit Inc (NYSE:FIT), despite their technical struggles

Feb 8, 2016 at 12:13 PM
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U.S. stocks are getting bashed again, sending several names to new lows. Among the names panning fresh milestones are social media stock Twitter Inc (NYSE:TWTR) and wearable tech firm Fitbit Inc (NYSE:FIT) -- both of which are scheduled to release their quarterly results this month. Let's take a closer look below at TWTR and FIT to see how Wall Street is positioned. 

It seems like every day we're talking about TWTR's struggles. Today the stock hit a record low of $14.87, breaching the $15 level for the first time ever. The shares were 3.1% lower at $15.24 at last check, and there are even new rumors circulating to boot.

Over the weekend, BuzzFeed reported the company was close to changing its timeline structure, news that prompted the hashtag #RIPTwitter. What's more, re/code is speculating the company could introduce two new board members when its reports its earnings after the close on Wednesday. 

Looking at the sentiment side of things, call buying has maintained its edge at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) over the past 10 sessions -- despite the stock's struggles -- coming in at 1.98. However, this reading is only 6 percentage points from an annual low, meaning, on a relative basis, this rate of call buying versus put buying is actually well below what we're using to seeing from TWTR speculators. 

In today's trading, meanwhile, put volume is running slightly above expected midday levels. However, those purchasing near-term options better be ready to pay up. With earnings on the horizon, Twitter Inc's Schaeffer's Volatility Index (SVI) of 130% is docked at an annual high. In other words, the options market is pricing in extremely high volatility expectations ahead of Wednesday's quarterly event. 

Meanwhile, FIT is down 6.9% at $14.65, touching an all-time low of $14.16 earlier. This puts the shares 72% lower since their record high of $51.90 in August, and what's truly been interesting is how analysts continue to wax optimistic despite this price action. At the moment, FIT sports 16 "buy" or better ratings, five "holds," and not a single "sell" recommendation. 

And like TWTR, Fitbit Inc call buying has remained popular at the ISE, CBOE, and PHLX. For instance, more than 11,000 calls have been purchased to open over the past two weeks, compared to fewer than 5,000 puts. In fact, the stock's most popular option today is the weekly 2/12 15-strike call, which traders are buying to open in hopes of the shares retaking the $15 level before expiration at week's end. Looking ahead, the company is scheduled to report earnings after the close on Monday Feb. 22. 


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