Unusual Options Activity In Twitter $TWTR

| October 14, 2015 | 0 Comments

TWTRUnusual Options Activity In Twitter $TWTR 

As many of you know, unusual options activity can be a valuable indicator as to what traders are thinking, and more importantly, where these stocks are heading in the short-term.

This is something professional options traders pay a lot of attention to, and for good reason…  Unusual options activity can “tip off” big moves in a stock, either up or down.

So let’s take a look at some ‘interesting’ activity that caught our eye this week…

Twitter $TWTR is the world’s leading microblogging site.  The site has over 300 million monthly active users, about 80% coming from mobile devices.  For a good description of the company, follow the link.

$TWTR is trading at $29.71 down 20% for the year.  That’s 45% below the 52-week high and 41% above the 52-week low.

So what does unusual options activity in TWTR tell us?

TWTR is getting something of a bump as the company announced 8% layoffs this week.  Twitter has been plagued by subpar management and slowing growth in recent quarters, so this is good news to many investors.

Recently reconfirmed as CEO, Jack Dorsey is already showing his impact on the company.  While cutting costs is generally not a bad idea, the company’s product still needs work in order to reverse the trend of slowing user growth.

Here’s the deal…

This week, a trader purchased a large block of TWTR January 2017 calls.  Keep in mind, a call option makes money when the underlying stock goes up before its expiration date.

Specifically, a trader purchased 8,250 calls not expiring until January of 2017.  He or she paid a whopping $5.15 per contract for the calls or a total of about $4.3 million.  Breakeven for the trade is right around a $35 share price.

Here’s the chart of $TWTR:

unusual option activity, a chart of TWTR

TWTR has had a tough year, as you can see pretty clearly on the chart. It just recently broke above the 50-day moving average on fresh positive news.

This trade is suggesting a rebound in the stock, but it could be a while from now.  You don’t spend $4 million on calls unless you have a strong conviction on the future of the stock.  On the other hand, that’s the kind of money you have to fork out in order to buy a large amount of time on your options.

Ultimately though, this is a very bullish signal for the often-under-fire company.

More Options Trading Ideas…

Keep in mind, there’s a lot more unusual options activity going on than what we discuss here.

We just try to bring you what we feel are the most significant ones– and the ones you might actually be able to make some money on!

Yours in Profit,

Gordon Lewis

Note:  Gordon Lewis has been trading options for more than 15 years and he now writes and edits for Optionstradingresearch.com.  You can sign up for the newsletter and get a free research report. We are your go-to source for top notch options trading research.

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Category: Unusual Options Trading Activity

About the Author ()

Gordon Lewis is the Chief Investment Strategist and editor for the popular daily newsletter – Options Trading Research. He’s also editor of our dynamic theme-based options trading service, Advanced Options Adviser, and one of the key analysts behind the highly successful Options Trading Wire.