Fresh M&A Buzz Fuels Call Volume On Twitter Inc (TWTR)

Calls continue to be popular on Twitter Inc (NYSE:TWTR)

Jun 28, 2016 at 12:18 PM
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Twitter Inc (NYSE:TWTR) is up 3% at $16.32, as M&A rumors continue to swirl. Specifically, Microsoft Corporation's (NASDAQ:MSFT) historic buyout of LinkedIn Corp (NYSE:LNKD) breathed fresh life into TWTR takeover rumors, and most recently, TechCrunch outlined a number of reasons why Twitter should put itself up on the auction block. Meanwhile, in the stock's options pits, calls continue to outpace puts, with the former leading the latter by a more than 2-to-1 ratio.

Drilling down on the day's action, it looks like a number of options traders may be selling to close their weekly 7/1 16- and 16.50-strike calls ahead of this Friday night's expiration. Elsewhere, it appears as if one bold trader may have initiated a short straddle with TWTR's August 18 calls and puts, expecting minimal movement from the shares -- or a sharp drop in implied volatility -- over the next two months.

Today's accelerated call volume is nothing new in TWTR's options pits, though. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 50-day call/put volume ratio of 3.34 ranks higher than 90% of all comparable readings taken in the past year.

Echoing this is TWTR's Schaeffer's put/call open interest ratio (SOIR) of 0.49. Not only does this show that call open interest more than doubles put open interest among options expiring in three months or less, but it ranks in the low 17th annual percentile. In other words, short-term speculators are more call-heavy than usual toward TWTR.

Technically, Twitter Inc (NYSE:TWTR) has been on a long-term downtrend, shedding more than half its value over the past 52 weeks. More recently, the stock's attempt to rebound has stalled out near the $17 level -- home to its late-April pre-bear-gap low -- as well as TWTR's descending 120-day moving average.

TWTR daily chart

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