Calls spike as Twitter rips higher

David Russell (
December 26, 2013

Twitter has been going straight up, and the option paper is in a frenzy.

Our tracking systems shows more than 620,000 contracts trading in the social-media stock today, roughly 10 percent of total volume in the broader market. It dwarfs the activity in usual heavyweights such as Facebook and Apple, which have traded barely 400,000 combined today. Only the SPDR S&P 500 (:SPY) exchange traded fund sees more activity.

And sentiment remains extremely bullish in the microblogging stock. The January 90s are the busiest strike, trading more than 70,000 contracts. The January 85s follow at 63,000, and the January 95s have changed hands more than 55,000 times. All three were heavily bought, according to our Heat Seeker tracking program.

TWTR is up 6.17 percent to $74.28 in afternoon trading and has almost tripled from its initial public offering on Nov. 7. Its shares were initially proposed for as little as $17.

Long calls lock in the price where a stock can be purchased, letting investors cheaply position for a rally. They can also help anticipate moves as traders buy the contracts before amassing shares. That's exactly what happened in TWTR earlier this month as short-term options shot up more than 400 percent in a matter of days. And the stock hasn't stopped moving since. (See our Education section)

FB has been active as well , breaking out to new highs and pulling the broader social-media group higher, as seen in orange in the one-month view of our researchLAB analysis tool shown below. That stock is up another 0.28 percent to $58.12 today.

TWTR calls outnumber puts by almost 3 to 1 so far today, according to the Heat Seeker. FB has a similarly bullish mix.

(Graphic courtesy of researchLAB )

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