Unusual Options Activity: Twitter (TWTR)

Social media giant Twitter (TWTR) saw its shares drop heavily in late April, closing out a bearish chart signal. Now, shares are trending up again, and one trader sees the potential for a new all-time high this summer.

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  • That’s based on the August $80 calls. With 71 days until expiration, over 11,444 contracts traded, a 113-fold jump in volume from the prior open interest of 111. With shares just under $60, it would take a 33 percent rally for the option to move in-the-money.

    The buyer of the call options paid about $0.68 to make the trade.

    Shares of Twitter initially slid this year following its ban on Donald Trump, only to head to new highs. Now, shares are back to break-even for the year as they’ve started rallying again.

    Despite a 28 percent jump in revenue over the past year, the company still remains unprofitable. However, the company still has more cash than debt on the balance sheet, and the company is looking to unveil additional paid services which could add to the firm’s bottom line this year.

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  • Action to take: A continued uptrend in shares is likely. The August calls are aggressive in terms of the trade moving in-the-money. But with its low cost, the options can likely deliver mid-to-high double-digit returns well before the trade comes close to expiring. The trade looks like a reasonable one in terms of low cost and upside potential.

     

    Disclosure: The author of this article has no position in the stock mentioned here, but may make a trade this company after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.