Electric cars

Twitter’s options trades ahead of Musk disclosure raise analysts’ eyebrows

Twitter's options trades ahead of Musk disclosure raise analysts' eyebrows

Elon Musk attends the opening ceremony of the new Tesla Gigafactory for electric cars in Gruenheide, Germany, March 22, 2022. Patrick Pleul/Pool via REUTERS

Join now for FREE unlimited access to Reuters.com

NEW YORK, April 4 (Reuters) – Some timely exchanges in options on Twitter Inc (TWTR.N)in the days before Tesla Inc. (TSLA.O) boss Elon Musk has revealed a large stake in the social media company, raising eyebrows among options analysts.

On Monday, Musk revealed a 9.2% stake in Twitter, making him the company’s largest shareholder and triggering a 26% rise in Twitter shares to over $49. Read more

The news follows a flurry of bullish Twitter options trades in recent days, including call options betting on Twitter shares topping $43 on April 29, up more than 10%, which were trading in noticeably high numbers.

Join now for FREE unlimited access to Reuters.com

“It certainly appears that someone was aware of Musk’s building up of a stake, which is information that would likely be readily available across all trading desks due to the large size of the position,” he said. Joe Kunkle, founder of options analysis firm OptionsHawk.com in Philadelphia.

The trades stood out because they were betting on Twitter to gain strong momentum in a relatively short period of time, Kunkle said.

For example, someone bought 3,900 of the April calls at $43 for around $530,400, just minutes before the end of Thursday’s trading session. A total of 21,706 of those contracts changed hands on Thursday, making it the fourth-largest block of open contracts on Twitter overnight, according to data from Trade Alert.

The contracts would also capture any movement in the share price after Twitter’s earnings results, due on April 28.

With Twitter’s stock price surging on Monday, trades are set to make big gains. For example, the April 29 $43 calls, which traded at an average price of $1.26 on Thursday, changed hands at an average price of $6.92 on Monday, a gain of over 400%, according to a Reuters analysis of the transactions.

Bullish options on Twitter have drawn unusually heavy activity since Musk tweeted on March 25 that he was seriously considering building a new social media platform, while questioning Twitter’s commitment to of free speech, Matt Amberson, director of options analysis firm ORATS, mentioned. Read more

“I find it interesting that the calls were bought in haste, late in the day before the end of the quarter. If I were a regulator, I would be looking at these trades,” said Steve Sosnick, chief strategist at Interactive. Brokers.

“It’s not a gun, but it deserves careful consideration,” he said.

The U.S. Securities and Exchange Commission looks for unusual trades ahead of news announcements and has used that data to investigate insider trading in the past, according to public filings.

The SEC did not immediately respond to a request for comment on Twitter’s options trading. Twitter and Tesla did not immediately respond to a request for comment on the business activity.

Join now for FREE unlimited access to Reuters.com

Reporting by Saqib Iqbal Ahmed; Editing by Megan Davies and Lisa Shumaker

Our standards: The Thomson Reuters Trust Principles.