Most Active Weekly Options: Tesla Motors Inc and Twitter Inc

With earnings on tap this week, weekly options traders have set their sights on Tesla Motors Inc (NASDAQ:TSLA) and Twitter Inc (NYSE:TWTR)

Oct 25, 2016 at 11:23 AM
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The 20 stocks listed in the table below have attracted the highest weekly options volume during the past 10 trading days. Stocks highlighted are new to the list since the last time the study was run, and data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White. Two notable names are electric car maker Tesla Motors Inc (NASDAQ:TSLA) and recent M&A target Twitter Inc (NYSE:TWTR). Here's a closer look at how weekly options traders have been targeting TSLA stock and TWTR stock ahead of this week's earnings reports.

most active weekly options october 25

TSLA -- which is due to unveil its third-quarter earnings report after tomorrow's close -- has seen an influx of call buying relative to put buying in recent weeks. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), specifically, the stock's 10-day call/put volume ratio of 1.40 ranks just 4 percentage points from a 52-week peak.

Drilling down, the security's weekly 10/28 212.50-strike call has seen the biggest rise in open interest among weekly options across this time frame, with 2,448 contracts added. Plus, this out-of-the-money strike is now home to peak open interest of 3,647 contracts outstanding in the weekly 10/28 series. Per Trade-Alert, it looks like a number of these positions were bought to open, meaning traders are betting on a post-earnings breakout north of $212.50 by this Friday's close, when the series expires.

Looking at the charts, TSLA hasn't settled a week north of this strike since late August. More recently, the shares have been testing their footing atop $200, with TSLA stock last seen down 0.1% at $202.62. As such -- and with nearly 24% of Tesla Motors Inc's float sold short -- some of the recent activity at the weekly 10/28 212.50-strike call could be a result of short sellers hedging their bearish bets against any post-earnings upside.

After being rejected as a potential takeover target by several big-name companies, TWTR will lay off approximately 8% of its workforce, according to Bloomberg. The official announcement is expected when the company unveils its third-quarter earnings report, which will now be released ahead of Thursday's open as opposed to after the close.

Against this backdrop, shares of TWTR have plunged 4.4% to trade at $17.23. This negative price action is just more of the same for a stock that's surrendered nearly one-third of its value since hitting its most recent M&A-induced high of $25.25 on Oct. 5. Longer term, TWTR stock is down 44% year-over-year.

And even though TWTR has logged a loss in the session subsequent to reporting in seven of the past eight quarters -- shedding an average of 10% -- it looks like some traders are betting on $17 to serve as support through week's end. Specifically, Twitter Inc's 17-strike put is home to peak open interest in the weekly 10/28 series, with 16,657 contracts outstanding, and according to Trade-Alert, there appears to have been a healthy amount of sell-to-open activity that's occurred here of late.

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