Unusual Options Activity: Twilio (TWLO)

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Call buying suggests pop higher this week.
The November 15th $98.50 call options on
Twilio (TWLO) saw over 8,400 contracts trade, a 44-fold explosion in volume from the prior open interest under 200 contracts.

The option, expiring in two days, is about 5 percent out-of-the-money and thus on track to expire at zero. The call buyer expects some kind of move higher, and the call seller expects shares to stay under the strike price.

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  • Shares of the cloud communications company fell nearly 3 percent on Tuesday, following a report that one of their biggest clients, WhatsApp, was shifting to other vendors.
    Action to take: None. The option trade expires too quickly, and has little prospect of making investors any money right now—and the sale of call options may have been a hedging trade by shareholders looking to write covered calls.

    Owning shares is a difficult prospect, given the company’s recent news, as well as the fact that it’s still barely making any money while earnings and revenues are declining, especially compared to competitors.

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    With the company midway between its 52-week high and low, we expect further downside. Traders should look at the April 2020 $80 puts, which could nearly double from $6 to $10 if shares make another run at their 52-week low near $70.

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