Call Options Pick Up on Red-Hot Twitter Inc (TWTR)

Twitter Inc (TWTR) call options are running at triple the expected intraday clip

Aug 31, 2016 at 11:01 AM
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Twitter Inc (NYSE:TWTR) call options have caught fire, trading at triple the usual intraday rate, and nearly six times the pace of puts. In fact, call volume is currently running in the 99th percentile of its annual range, with bullish bets being placed.

Taking a quick step back, options traders are being provoked by relative strength in TWTR shares. The social media stock has jumped 4.9% to hover near $19.29, after co-founder Evan Williams appeared last night on Bloomberg, where he expressed his faith in CEO Jack Dorsey. Separately, Twitter announced it is teaming with BAMTech to stream NFL games this season.

Returning to the options action, the weekly 9/2 18.50-strike call is in the lead. According to Trade-Alert, traders are likely buying new positions, banking on extended gains through this Friday's close, when the weekly series expires. Meanwhile, longer-term option bulls may be buying to open the out-of-the-money January 2017 January 20 call.

Today's TWTR call buyers are hardly alone. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have picked up nearly four calls for every put during the last 10 days. The resultant call/put volume ratio of 3.82 sits near the top quartile of its annual range. Of course, a portion of these call purchases could have come at the hands of short sellers hedging, considering almost one-tenth of TWTR's float is sold short.

Underscoring the stock's call-skew is its Schaeffer's put/call open interest ratio (SOIR) of 0.52. Not only does this ratio indicate calls roughly double puts among options expiring in the next three months, it also ranks below 70% of all readings taken in the past 52 weeks.

Twitter Inc (NYSE:TWTR) options traders have good reason to buy calls, too. The social media stock has been running higher since bottoming in late May, south of $14. Still, from a longer-term perspective, the shares have gotten roughed up -- surrendering almost 29% of their value on a year-over-year basis.

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