Twitter Options See Strong First Session
By Kaitlyn Kiernan
Like the stock before it, Twitter Inc. options debuted strongly Friday, with enough contracts traded to make it the 11th-most-active single-stock option.
"It was a very nice first day," said JJ Kinahan, chief strategist at T.D. Ameritrade. "A lot of products take a lot of time to get a base, but Twitter had a good first day."
About 122,500 Twitter options traded Friday, linked to about 12.2 million shares. That was enough to make it the 11th most-active amid single-stock options, according to options-data firm Trade Alert LLC, behind heavyweights such as Apple Inc. and Facebook Inc. Facebook options set a record last year, with nearly 365,000 contracts exchanging hands in the first session, according to the data.
Friday's volume was in line with an estimate from Trade Alert president Henry Schwartz for 125,000 contracts to trade, based on the number of Twitter shares available for trading and comparisons with the options debuts of Facebook and LinkedIn Corp., which saw 23,000 options trade in its first day.
Options allow investors to speculate on a rise or fall in shares over a specific period in time. Call options grant the right to buy 100 shares at a set price by a designated date, while put options grant the right to sell. Sellers of options accept the obligation to sell or buy shares should the contracts be exercised.
Twitter shares slipped 71 cents, or 1.6%, to $43.98 Friday, leaving the stock up 69% from its initial offering price. The shares began trading last Thursday.
Trading in put options, which grant the right to sell shares, ran at twice the pace of trading in bullish call options Friday.
That imbalance was helped, in large part, by a number of large "sweep" trades in a contract expiring in five weeks. In a sweep, a position is split into a number of smaller trades across a variety of options exchanges.
An investor--or multiple investors--sold about 30,000 December $30 put options for five cents a share, or a total of $150,000. In exchange for that premium, the investor or investors accepts the obligation to buy about three million shares at that price should they drop below $30 a share and be exercised by the buyers.
T.D. Ameritrade's Mr. Kinahan describes that trade as a good way to buy shares as the price falls. While an investor might be unwilling to buy shares at their current price, he or she might be happy to at $30 a share.
That option traded nearly eight times more contracts than the next most-actively traded Twitter option Friday, the December $50 call options. That option conveys the right to buy shares at that price through mid-December.
Write to Kaitlyn Kiernan at kaitlyn.kiernan@wsj.com
By Kaitlyn Kiernan
Like the stock before it, Twitter Inc. options debuted strongly Friday, with enough contracts traded to make it the 11th-most-active single-stock option.
"It was a very nice first day," said JJ Kinahan, chief strategist at T.D. Ameritrade. "A lot of products take a lot of time to get a base, but Twitter had a good first day."
About 122,500 Twitter options traded Friday, linked to about 12.2 million shares. That was enough to make it the 11th most-active amid single-stock options, according to options-data firm Trade Alert LLC, behind heavyweights such as Apple Inc. and Facebook Inc. Facebook options set a record last year, with nearly 365,000 contracts exchanging hands in the first session, according to the data.
Friday's volume was in line with an estimate from Trade Alert president Henry Schwartz for 125,000 contracts to trade, based on the number of Twitter shares available for trading and comparisons with the options debuts of Facebook and LinkedIn Corp., which saw 23,000 options trade in its first day.
Options allow investors to speculate on a rise or fall in shares over a specific period in time. Call options grant the right to buy 100 shares at a set price by a designated date, while put options grant the right to sell. Sellers of options accept the obligation to sell or buy shares should the contracts be exercised.
Twitter shares slipped 71 cents, or 1.6%, to $43.98 Friday, leaving the stock up 69% from its initial offering price. The shares began trading last Thursday.
Trading in put options, which grant the right to sell shares, ran at twice the pace of trading in bullish call options Friday.
That imbalance was helped, in large part, by a number of large "sweep" trades in a contract expiring in five weeks. In a sweep, a position is split into a number of smaller trades across a variety of options exchanges.
An investor--or multiple investors--sold about 30,000 December $30 put options for five cents a share, or a total of $150,000. In exchange for that premium, the investor or investors accepts the obligation to buy about three million shares at that price should they drop below $30 a share and be exercised by the buyers.
T.D. Ameritrade's Mr. Kinahan describes that trade as a good way to buy shares as the price falls. While an investor might be unwilling to buy shares at their current price, he or she might be happy to at $30 a share.
That option traded nearly eight times more contracts than the next most-actively traded Twitter option Friday, the December $50 call options. That option conveys the right to buy shares at that price through mid-December.
Write to Kaitlyn Kiernan at kaitlyn.kiernan@wsj.com
