Twitter Inc (TWTR) Options Players Set Their Sights Higher

Twitter Inc (TWTR) is rallying today, sparking another round of bullish options trading

May 4, 2016 at 1:37 PM
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Twitter Inc (NYSE:TWTR) is defying broad-market headwinds and having a rare day in the sun -- though the catalyst isn't entirely clear. Perhaps it has something to do with the social media stock's 14-day Relative Strength Index (RSI), which settled last night at 30, in oversold territory. Whatever the case may be, TWTR's rally has call options running at an accelerated intraday clip.

By the numbers, 55,000 calls have been exchanged, more than tripling the 16,000 puts on the tape. The most popular option is the weekly 5/6 14-strike call, which appears to be seeing buy-to-open activity. By purchasing these in-the-money calls, options traders are wagering on TWTR to extend its upside move through the end of the week, when the series expires.

This is more of the same for the social media stock. During the past 50 trading days across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), speculators have bought to open 3.37 calls for each put. The corresponding call/put volume ratio sits a mere 1 percentage point shy of an annual high.

Digging deeper, the TWTR call option seeing the biggest increase in open interest over the past two weeks is the out-of-the-money May 15 strike. More than 6,000 new contracts have been purchased in the last 10 days on the major options exchanges, as short-term traders speculate on extended upside.

This may be a dangerous bet, considering Twitter Inc's (NYSE:TWTR) history. While the social media stock is charging higher today, it wasn't long ago that it took a nasty spill on earnings. In fact, just yesterday, TWTR panned a record low of $13.90. At last check, the shares have added 3.8% to trade at $14.54.

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