TWTR – Twitter, Inc. – Shares in Twitter are in negative territory today, moving lower after rallying four of the past five trading sessions amid downgrades to ‘Neutral’ from ‘Buy’ at SunTrust Robinson and ‘Underperform’ from ‘Market Perform’ at Wells Fargo. The stock traded up to a new all-time high of $60.24 during morning trading, but currently stand 3.0% lower on the session at $57.25 as of 11:45 a.m. EST.
Trading in far out of the money TWTR call options expiring next week suggests some traders are positioning for the price of Twitter’s shares to move substantially higher before the end of the calendar year. Upwards of 5,000 of the 27 Dec ’13 $70 strike calls changed hands by midday in New York against zero open interest. Time and sales data suggests most of the calls were likely purchased at premiums of $0.50, $0.65 and $0.80 per contract. Call buyers may see the value of these contracts increase if shares in Twitter rebound and resume hitting fresh highs prior to expiration.
Overall options volume on Twitter is above the stock’s average daily reading, with around 118,000 contracts traded by midday versus TWTR’s average daily options volume of around 110,000 contracts.
RY – Royal Bank of Canada – Options on Royal Bank of Canada are more active than usual today amid heavy trading in Jan ’14 expiry put options. Shares in RBC are on the rise, up 1.8% on the session at $65.55 as of 12:15 p.m. in New York trading amid reports the Canadian bank may be considering a spinoff of parts of its proprietary trading business.
The most traded options contracts on the stock are the Jan ’14 $65 strike puts, with upwards of 3,000 lots in play against open interest of 1,945 contracts. It looks like most of the puts were purchased roughly one hour into the trading day at a premium of $1.15 each. The contracts may be profitable at expiration next month in the event that the price of the underlying slips 2.6% from the current price of $65.55 to breach the breakeven point on the downside at $63.85.
