Can This Social Media Stock Double in the Next Year?


A social-media stalwart got hammered yesterday, and someone positioned for a major rebound.

Twitter (TWTR) fell almost 9 percent about halfway through the morning. As it clawed its way back to cut those losses, a trader amassed about 80,000 January 2020 70 calls for $0.55. Excluding ETFs, it was the busiest options contract all session.

Calls fix the price where a security can be purchased. (See our Knowledge Center.) As we saw on Wednesday, cheap out-of-the money contracts can generate huge leverage on a percentage basis when a rally occurs.

But yesterday’s options were really something because they expire more than a year into the future. Their strike price is also more than double TWTR’s current value, which suggests the investor is looking for a long-term rebound.

Twitter (TWTR) chart with 50-day moving average and call volume.

News on the company has mostly been positive, with indications it’s taken market share from rival Facebook (FB). However yesterday it was apparently hurt by worries about a potential boycott by political conservatives.

Overall options volume in TWTR was quadruple the average in the last month, with calls accounting for a bullish 78 percent of the total.

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David Russell is VP of Market Intelligence at TradeStation Group. Drawing on two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them apprised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.