Option Bulls Go Wild for 2U on Sale Buzz

TWOU has added 90% since July

by Lillian Currens

Published on Jan 17, 2020 at 1:17 PM

Online education concern 2U Inc (NASDAQ:TWOU) is surging today, after a tweet from Bloomberg suggested that the firm was weighing a potential sale under pressure from activist investor Sachem Head Capital Management. The stock has added 7.3% to trade at $23.36, and the options pits are going wild in response. 

So far, 5,086 calls and 1,337 puts have exchanged hands -- 28 times what's typically seen at this point, with call volume pacing for the 99th percentile of its annual range. The most popular is the July 30 call, with positions being potentially sold to open here, The January 2020 22.50-strike call and the July 20 put are seeing quite a bit of action as well, with positions being purchased at the latter. 

While options volume is typically light, bulls appear to have the upper hand of late. In fact, during the past 10 days, 2.56 calls have been bought for every put at the  International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). 

That being said, options are incredibly cheap right now, per TWOU's Schaeffer's Volatility Index (SVI) of 54%, which sits lower than all but 20% of readings from the past year. This means that options are pricing in relatively low volatility expectations right now. What's more, the equity's Schaeffer's Volatility Scorecard (SVS) sits at 88 out of a possible 100, suggesting that 2U has tended to exceed options traders volatility expectations during the past year. 

Taking at look on the charts, 2U still has a ways to go if its wants to close its late-July bear gap. However, since hitting subsequent bottom at the $12 level, TWOU has climbed steadily higher, with recent support at its 80-day moving average catching a recent pullback. Since this low, the equity has added more than 86%. 

TWOU Jan 7


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