Seeking Alpha

Twitter rebounds, call option buying picks up

  • After falling 17% between Friday and Monday, heavily-shorted and richly-valued Twitter (TWTR +7.4%) is bouncing strongly going into New Year's. Nearly 9M shares have already changed hands.
  • The WSJ observes the number of Twitter call options outstanding surpassed the number of put options outstanding for the first time on Monday, even as shares continued to dive. January $85 and $90 calls (expire Jan. 17) are especially popular.
  • With Twitter's options carrying steep premiums, MKM's Jim Strugger suggests longs hedge their bets by selling calls. "Anyone coming in here and just buying calls or puts could get smoked, even if they're directionally correct."
  • Twitter shareholder GSV Capital (GSVC +2%) is also rebounding a bit.
Comments (6)
  • This guy must be following my advice :D I think the run will be over after January 18th though unless there's another 130K contracts waiting for February.
    31 Dec 2013, 10:48 AM Reply Like
  • Not sure what data the WSJ is looking at. According the Schaeffer's Investment Research, the open interest put/call ratio plunged below 1 on Friday when Twitter surged to the moon (and likely topped out for a good while (http://seekingalpha.co...).

     

    I also don't get the advice of telling trader to avoid options because they are "expensive." The shares are expensive too. The options are getting more expensive because traders expect Twitter's "range of motion" to greatly expand. Traders who are directionally correct will be fine as long as Twitter doesn't come to a sudden stop and just bounces in a tight range. And with these technicals, hard to imagine Twitter staying put for long.
    31 Dec 2013, 11:17 AM Reply Like
  • Yes, it's only natural for some rebound if the slide is not sustained because everyone is hoping to make some quick money on the side, as I did this morning. Got in pre-market and got out at $64.50 for a tidy profit. Can't be too greedy because this is only a year-end attempt to pump up the bubble again, in order to ring in a happy and prosperous new year. The faster it climbs, the sooner it will fall. That's how stocks generally behave. If the price appreciates gradually, instead of rocketing skywards, then the appreciation will be real and sustained. In the case of TWTR, without a revenue stream, the bubble will still burst and the fallout will be worse, especially with today's sharp rebound that has made more believers willing to risk it further, which will make the bloodletting even worse. In the meantime, we can always make money trading it for some quick profit, which will add up to a tidy sum after some time. Here's wishing everyone a Happy and Healthy New Year. God bless always.
    31 Dec 2013, 12:48 PM Reply Like
  • Mastercard shares have skyrocketed this year. i don't see it plunging anytime soon except for the 10-1 split.

     

    Today is just the market makers trying to pump the bubble again. Expect a big jump Thursday when markets open again.
    31 Dec 2013, 01:54 PM Reply Like
  • alext...you may be right to expect a big jump on Thursday. We'll know from the pre-market action, which is often a good indicator where the trend will head, whether up or down. Once the trend is clear enough before the market opens, I'll usually try to get into some action myself and clear out after the market opens. I'm always happy making a couple of bucks, unless the action continues to be hot, in which case, I'll trade some more, so bring it on and pump it up.

     

    I can't say anything about MA shares because I can't be interested in everything on the stock market, only on those from which I can make me some quick money. However, I'm sure that MA shares didn't shoot all the way to the top suddenly but it moved up gradually over a period of time and not suddenly like TWTR. That is an indicator of stability and reality because MA do generate revenue and prospects are good for increasing revenue, unlike TWTR, which hasn't produced any profit yet. Insiders of TWTR are hoping to emulate FB with their IPO funds but it's harder for them and when rubber hits the road, the insiders will be dumping their considerable holdings and the rest will be history. There will be blood on the streets.
    31 Dec 2013, 05:04 PM Reply Like
  • Although it is 4 mos away, how much more float comes out at the end of lock-up?
    31 Dec 2013, 05:36 PM Reply Like
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