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M&A Buzz Sparks, inc. (CRM) Options Frenzy, inc. (CRM) call option volume is nearing an annual peak as Twitter M&A rumors swirl

Sep 23, 2016 at 12:47 PM
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Cloud computing specialist, inc. (NYSE:CRM) is making waves, as rumors swirl that CRM or Alphabet Inc (NASDAQ:GOOGL) could soon make a formal bid for Twitter Inc (NYSE:TWTR). While none of the companies involved have commented on the matter, CRM exec Vala Afshar sent out a not-so-cryptic tweet earlier today, and the tech company's options are flying off the shelves:



Which he then promptly followed up with a coy addendum, stating, "I have tweeted my personal views regarding 'Why Twitter?' numerous times over the past couple years. I simply love Twitter."

This M&A buzz hasn't been kind to CRM shares, which is currently the second-worst performing stock on the S&P 500 Index (SPX), down 5.1% at $70.76. From a longer-term perspective, CRM has fallen 9.2% year-over-year, steadily declining since a post-earnings bear gap at the beginning of the month, which sent the shares south of its 200-day moving average -- a trendline that contained pullbacks earlier in the year, and which could now serve as a level of resistance, currently parked in the $75 range.

In the options pits, CRM contracts are crossing the tape at three times their average intraday pace, with 36,000 calls on the books, compared to 27,000 put contracts. Daily options volume is on pace to hit the 99th percentile of its annual range, with call volume set to touch a 12-month peak. Of CRM's top 10 most active options today, all are set to expire within the next four weeks.

It looks like some especially last-minute option players are taking one last stab before weekly expiration tonight, with buy-to-open action confirmed by the International Securities Exchange (ISE) on today's two most active CRM options: the weekly 9/23 70- and 72.50-strike calls. These option buyers are betting that today's downward trend will reverse course, and the stock will end up above the respective strike by the close.

Today's appetite for calls is a slight change of pace from recent norms, however. CRM's 50-day put/call volume ratio at the ISE, Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) of 0.81 sits higher than 92% of all other readings from the past year, indicating a heavier-than-usual bearish bias among, inc. (NYSE:CRM) option buyers. Meanwhile, CRM's Schaeffer's put/call open interest ratio (SOIR) of 0.83 is in the 89th percentile of its annual range, further demonstrating a bigger-than-usual put-skew among near-term option players.

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