TWTR – Twitter, Inc. – Shares in Twitter slipped 5.4% to a new post-IPO low of $38.80 on Monday morning, sparking mixed trading in weekly options on the stock. Overall volume in Twitter options is a little less than half of the stock’s average daily volume, with around 42,000 contracts traded as of midday in New York. Put options are more active than calls, with the put/call ratio nearing 2.3 as of the time of this writing.
Of those contracts that expire at the end of the shortened trading week, the Nov 29 ’13 $39.5 strike puts attracted the most volume. Upwards of 3,600 of the $39.5 strike puts have changed hands so far against open interest of 333 contracts. Time and sales data suggests most of the volume was purchased this morning at a premium of $0.60 each. Traders long the puts stand ready to profit at expiration this week in the event that shares in TWTR decline roughly 0.75% from the current price of $39.20 to trade below the breakeven price of $38.90.
Meanwhile, looking out to the Dec 06 ’13 expiry contracts, upside call buying indicates other traders are positioning for the price of the underlying to rebound in the near term. One strategist appears to have purchased roughly 1,000 of the Dec 06 ’13 $40 strike puts at a premium of $1.00 each. The bullish position makes money at expiration next week if TWTR shares rally 4.5% over the current level to exceed the breakeven point at $41.00.