Options Traders React to Another Big Twitter Stock Win Streak

Twitter stock is on pace for a fifth straight win

Sep 12, 2017 at 1:36 PM
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Shares of Twitter Inc (NYSE:TWTR) are in the midst of yet another impressive win streak. Today's 2.7% rise has the stock trading at $18.13, on pace for its fifth straight win and second consecutive close above the 100-day moving average. This would mark TWTR's highest close since it gapped lower after earnings in late July. Options traders have flocking to the social media name, too, betting on extended upside in the weeks ahead. 

twitter stock chart

Over the past 10 days, Twitter has accumulated a call/put volume ratio of 6.25 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), showing more than six calls have been bought to open for every call during this time span. This reading ranks above 91% of all comparable marks from the past year, hinting at an unusual bullish bias from options traders. 

The October 20 call saw notable buy-to-open activity during the past two weeks. These traders are betting on TWTR topping $20 by the close on Friday, Oct. 20, when the calls expire. The shares closed above $20 in three consecutive days back in July, just before the aforementioned post-earnings bear gap. 

There was also heavy buying at the September and October 18 calls. The September contracts, which expire this Friday, are now in the money. The most popular contact during the past two weeks, however, was the January 2019 37-strike call, where 33,828 positions were added. This is now home to peak open interest for the security, but it's not clear what strategy these call traders deployed. 

Call volume is accelerated today, too, running at two times the expected pace and more than doubling put volume. The most popular contract by a mile is the October 19 call, and it looks like a number of premium sellers are buying to close their positions here, possibly in anticipation of extended upside for TWTR. 

Looking elsewhere, data suggests it's a good time to target short-term contracts. This is according to the equity's Schaeffer's Volatility Index (SVI) of 37%, which ranks just 12 percentage points from a 52-week low. Said differently, near-term volatility expectations on Twitter stock are relatively muted. 

If TWTR does continue to rise on the charts, it could benefit from a round of positive attention from analysts. As it stands now, not a single brokerage firm has a "buy" rating on the shares, and their average 12-month price target sits down at $15.91. Upgrades and/or price-target hikes seem like a reasonable possibility. 

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