Twitter Options Trades Ahead of Elon Musk Disclosure Raise Analysts’ Eyebrows

Some well-timed trades within the choices on Twitter, within the days earlier than Tesla CEO boss Elon Musk revealed a big stake within the social media firm, are elevating eyebrows amongst choices analysts.

On Monday, Musk revealed a 9.2 % stake in Twitter, making him the largest shareholder within the firm, and triggering a 26 % rise in Twitter’s shares to over $49 (roughly Rs. 3,700).

The information follows a flurry of bullish buying and selling in Twitter’s choices in latest days, together with in name choices betting on Twitter shares rising above $43 (roughly Rs. 3,300) by April 29, or up greater than 10 %, which traded in noticeably massive numbers.

“It certainly seems someone was aware of Musk building a stake, which is information that would likely be readily available across trading desks due to the significant size of the position,” mentioned Joe Kunkle, founder of choices analytics agency in Philadelphia.

The trades stood out since they have been betting on Twitter to advance sharply inside a comparatively brief time-frame, Kunkle mentioned.

For instance, somebody purchased 3,900 of the April $43 (roughly Rs. 3,300) calls for about $530,400 (roughly Rs. 4 crore), simply minutes earlier than the top of the buying and selling session on Thursday. In all, 21,706 of these contracts modified palms on Thursday, in a single day making them the fourth-largest block of open contracts on Twitter, in response to Commerce Alert knowledge.

The contracts would additionally seize any share value strikes following Twitter’s earnings outcomes, anticipated on April 28.

With Twitter’s share value leaping on Monday, the trades stood to make massive positive aspects. For instance, the April 29 $43 (roughly Rs. 3,300) calls, which traded for a median value of $1.26 (roughly Rs. 100) on Thursday, modified palms at a median value of $6.92 (roughly Rs. 520) on Monday, a achieve of greater than 400 %, in response to a Reuters evaluation of the trades.

Bullish choices on Twitter have drawn unusually heavy exercise ever since Musk tweeted on March 25 that he was giving “serious thought” to constructing a brand new social media platform, whereas questioning Twitter’s dedication to free speech, Matt Amberson, principal at choices analytics agency ORATS, mentioned.

“I find it interesting that the calls were bought in a big hurry, late in the day ahead of the end of the quarter. If I was a regulator, I would be looking into these trades,” mentioned Steve Sosnick, chief strategist at Interactive Brokers.

“It’s not a smoking gun, but it deserves scrutiny,” he mentioned.

The US Securities and Trade Fee (SEC) scans for uncommon trades forward of information bulletins and has used such knowledge to convey insider buying and selling probes previously, public filings present.

The SEC didn’t instantly reply to a request for touch upon the buying and selling in Twitter’s choices. Twitter and Tesla didn’t instantly reply to a request for touch upon the buying and selling exercise.

© Thomson Reuters 2022

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