Shares of social media company Twitter (TWTR) have shed nearly half their value in the past three months. One trader sees the possibility for a strong rebound in the coming weeks.
That’s based on the April $40 calls. With 71 days until expiration, 10,058 contracts traded hands, a 20-fold rise in volume from the prior open interest of 502. The buyer of the calls paid $1.92 to make the trade.
Shares of Twitter traded recently around $35. So they would need to rise about 14 percent for the option to move in-the-money in the days ahead.
Given the steep drop in shares, such a move is possible before this option expires, as the option’s strike price of $40 is about half of the stock’s 52 week high just under $81.
Action to take: Shares look attractive here for investors looking for a rebound play. Revenue rose 37 percent for the platform over the past year. And shares last went for 22 times earnings, now giving shares a low price to earnings growth ratio.
Traders may like the April calls, as shares remain in oversold territory in the short term, but the decline has moderated in recent sessions. The option is also priced low enough that traders could potentially nab triple-digit moves higher depending on how the stock performs in the next few weeks.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.