Buyout Buzz Fires Up Twitter Inc (TWTR) Call Buyers

Twitter Inc (TWTR) options traders are eyeing an end-of-week move higher

by Alex Eppstein

Published on Mar 31, 2016 at 1:50 PM
Updated on Jun 24, 2020 at 10:16 AM

Social media stock Twitter Inc (NYSE:TWTR) is charging higher this afternoon, up 2.5% at $16.76. According to Trade-Alert, the rally is in response to unconfirmed takeover chatter. Regardless of the catalyst, it's clear options traders are anticipating even more upside through the end of the week.

At last check, TWTR calls are trading at 1.4 times the usual intraday rate. The weekly 4/1 series is in especially high demand, accounting for the three most active options. The top spot belongs to the weekly 4/1 17-strike call, where it appears traders are buying to open contracts hoping TWTR can topple $17 by expiration at tomorrow's close. Looking back, the shares haven't settled above the strike since March 14.

This is more of the same for the microblogging concern. During the past 10 days across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have bought to open more than four TWTR calls for each put. The resultant call/put volume ratio of 4.16 outstrips all but 4% of readings taken in the last year.

Another sign of the prevailing bias toward TWTR calls is the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.52. The SOIR indicates calls nearly double puts among options expiring in the next month, and also ranks in the low 12th annual percentile -- meaning the short-term call-skew has rarely been more pronounced in the prior year.

In other words, it seems like options traders expect Twitter Inc (NYSE:TWTR) to break from its long-term trend lower. Since topping out at an annual peak of $53.49 last April, the stock has plummeted about 69%. And while today's breakout is impressive, it's been contained by TWTR's pesky 40-day moving average.

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