Twitter Stock Options Surge as Musk Moves to Buy

Twitter's options pits are bustling with activity today

Assistant Editor
Apr 14, 2022 at 12:48 PM
facebook twitter linkedin


Twitter Inc (NYSE:TWTR) dominated headlines this week, amid what's shaping to look like a hostile takeover by Tesla Inc (NASDAQ:TSLA) CEO Elon Musk. On April 4, Musk took a more than 9% passive stake in the social media giant, cementing himself as the company's biggest shareholder. The following day, Twitter announced it would name the enigmatic billionaire to its board of directors, though Musk later announced he wouldn't take the seat.

Now, just ahead of Wall Street's three-day weekend, Musk and Twitter are back in the spotlight, after the former made an unsolicited bid to buy the latter for $52.85 per share -- around $43 billion. Twitter shareholders, meanwhile, filed a lawsuit alleging that Musk failed to disclose his stake with the U.S. Securities and Exchange Commission (SEC) in the allotted timeframe. 

Twitter Options Boiling Over Ahead of Expiration Thursday

Twitter stock was last seen down 0.7%, trading at $45.54 after opening the sessions at $48.37. Despite a six-month high of $54.57 nabbed on April 5, the shares' the 320-day moving average, which began pressuring TWTR in November, kept a lid on that peak. Now, the equity clings to a 5.3% year-to-date lead.

Options players are enjoying the drama ahead of expiration later today. So far today, 618,000 calls have exchanged hands, compared to 427,000 puts, both of which amount to five times the volume that's typically seen at this point. The most popular by far is the April 50 call, followed by the 45 put in the same monthly series. The split sentiment suggests these traders see a narrow route for Twitter stock to move in by the contracts' expiration at the end of today's session. 

Drilling things down further, it looks as if one investor bought 59,000 contracts on the April 50 call for a volume-weighted average price (VWAP) of $0.3135. If this is the case, breakeven for the call buyer at the close tonight is $49.865 (strike less premium paid). 

Given the interest in options, it's also worth noting the equity's Schaeffer's Volatility Scorecard (SVS) sits at 95 out of 100. This high score indicates TWTR has exceeded options traders' volatility expectations over the past year.

Tesla Shareholders Fret Divided Attention

Tesla stock is seeing a much larger downward swing in the face of Musk's latest venture, as some are skeptical on the impact the CEO's divided attention with the Twitter buyout could create. An early 2022 stab at reclaiming its November all-time highs was thwarted at the $1,200 level, resulting in quick succession of lower lows that sent TSLA to a Feb. 24 eight-month low of $700. Despite an early-April climb up the charts, recent losses put the stock 6.1% below its year-to-date breakeven level. 

 




 
Special Offers from Schaeffer's Trading Partners