Options Activity Alert: Twitter (TWTR)

TWTR – Twitter, Inc. – Shares in Twitter are on the decline today, slipping 2.8% to $42.73 during the first half of the session after the stock was rated new ‘Sell’ with a 12-month target share price of $34.00 at Wunderlich Securities. Options on Twitter, which began trading on Friday, are active today, with volume nearing 25,000 contracts as of the time of this writing.

A sizable ratio spread trade initiated on the stock near the open suggests one options player is positioning for further downside in the price of the underlying through the end of the calendar year. It looks like one trader established a one-by-two ratio put spread, buying 1,500 of the regular Dec $41 puts at a premium of $1.75 each, and selling 3,000 of the regular Dec $37 strike puts for a premium of $0.45 apiece. The ratio spread cost a net $0.85 per contract in premium and starts making money if shares in Twitter drop 6.0% from the current price of $42.73 to trade below the breakeven price of $40.15. The position makes maximum potential profits of $3.15 per contract if shares in TWTR tumble 13% to settle at $37.00 at expiration next month.

About Caitlin Duffy 373 Articles

Affiliation: Interactive Brokers

Caitlin Duffy joined Interactive Brokers in 2009. In her role as Equity Options Analyst, Caitlin provides daily market commentary; highlighting various options trades, trading patterns and strategies of interest. Through Interactive Broker's webinar program, Ms. Duffy presents a number of educational, options-related events describing the theoretical pricing of options, the option Greeks as well as options strategies.

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