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 The stock has shed more than a third of its value since Twitter
reported first-quarter results in April. It edged up 6 cents to
$34.62 on Thursday, after touching a year-low of $33.51 on Tuesday.
On June 11, Costolo said he would resign as CEO under pressure from
investors frustrated by the microblogging company's slow growth, but
the move failed to prop up Twitter's shares.
Options traders seem to be focusing on the near-term and may be
looking for something like a takeover bid to make the stock jump,
strategists said.
"It seems that everyone and their uncle is betting that Twitter will
be bought by another firm," said Steven Place, founder of options
analytics firm investingwithoptions.com in Destin, Florida.
Since May, open interest in calls, usually used for bets on the
shares rising, has swelled at a faster pace than the open interest
in puts. For every open put contract, 1.7 calls are open, the most
bullish for this ratio since early March.
Traders have bid up near-dated options, with the demand for upside
reflected in options skew - the difference between expectations for
volatility priced into puts versus calls.
Normally, puts tend to have a higher premium relative to calls,
because people are willing to pay more to protect against risk of
losses. For Twitter, calls have become more expensive than puts.
"The upside skew in Twitter most likely reflects the possibility of
an upside event between now and July expiration," Place said.
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That might not necessarily mean that traders are bullish on the
stock, but it does suggest investors want to own upside calls in
case of a takeover, said Pravit Chintawongvanich, derivatives
strategist at Macro Risk Advisors in New York.
Twitter's second-quarter results, due toward the end of July, could
be another reason for near-dated options to be bid, Chintawongvanich
said. The stock is usually volatile after reporting results, with
average one-day moves of 15 percent.
That co-founder Jack Dorsey is taking over from Costolo only on an
interim basis has left some analysts wondering if it is a signal for
a potential acquisition of the company.
Twitter has denied that it is in talks to be acquired.
(Reporting by Saqib Iqbal Ahmed; Editing by Richard Chang)
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