Twitter is drawing the attention of bullish options traders amid reports that the social media company has held preliminary talks regarding the possible acquisition of TikTok operations in the US.
President Donald Trump recently signed an executive order banning US transactions with TikTok’s parent company, ByteDance, which would essentially close TikTok in the US if it were not sold to a US company.
Last week, Microsoft confirmed that it has also held talks on the possibility of acquiring TikTok, which could pose problems for Twitter in tracking the popular social sharing app. However, the activity of options on Twitter in Monday̵7;s session painted a very optimistic picture that could become a kind of deal.
“We saw twice the average volume of daily calls, about 160,000 calls traded. Most of them were short-lived: calls 38, 39 and 40 strikes that went on until August expired,” said Michael Khouw, chief investment officer. in Optimize Advisors, Monday in “Fast Money”.
The August expiration is just two weeks from this next Friday, falling well within the time frame during which Twitter will have to conclude a TikTok market takeover deal, which could be a signal that these traders are betting for speculation to warm up as the Sept. 15 executive approaches the order deadline.
“Buyers of those 40 calls were paying around 75 cents,” Khouw said. “It would be a bet that the shares would rise around 8.5%, but it is understandable why they are using options. [to make that bet]. Options prices are relatively cheap on Twitter. “It’s a way for those investors to speculate, but not risk a big deal.”
Shares on Twitter were slightly higher in Tuesday’s session.