Twitter's Option Traders Brace For Big Stock Move After Earnings Report

By Markets MarketWatch Pulse

Twitter Inc.'s stock is surging 5.5% in morning trade Wednesday, but options traders are prepping for a much bigger move this week after the social media company reports fourth-quarter results after the closing bell. An stock option strategy known as a "straddle," which is a pure volatility play that involves the simultaneous buying of bullish and bear options at current prices, is implying a price move of about 18% through Friday, in either direction. At current prices, that would mean the buyer of the straddle wouldn't start making money unless the stock closes Friday above about $17.70, or below $12.30. The average one-day, post-results move in the stock, since Twitter went public in November 2013, has been 13%, and the median move has been 12%. Prior to Thursday's bounce, the stock had closed at record lows the past three sessions. It has tumbled 44% over the past three months, while the S&P 500 has lost 9.6%.

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