Big moves expected for Twitter on earnings

Twitter shares have been quite the disappointment for investors over the past year, down nearly 40 percent. But according to one trader, the stock has found a floor heading into Thursday's earnings report after the bell.

On Wednesday, when bullish activity outnumbered bearish activity 2 to 1, and the social media giant's shares were at $40.30, one trader sold 2,500 January 2017 38-strike puts for $8.00 a share. The wager, which is worth $2 million in premium, is a bet that Twitter's shares will stay above $30 by January 2017 expiration. The stock hit an all-time low of $29.51 per share in May 2014.

"When you think about this, if [Twitter's] stock is at $38 [per share] or lower by January 2017 expiration, that trader is obligated to buy 250,000 shares at $38, but here's the deal—they really would be buying them at $30 [per share]," said's Dan Nathan on Wednesday's episode of "Fast Money."

Read MoreCan Twitter prove the skeptics wrong?

Shares of Twitter have shown signs of life lately, rallying into Thursday's fourth-quarter earnings report, and up nearly 14 percent year to date. And the stock is expected to see even bigger moves after the company's results.

"The options market is implying the stock could move another 12 percent in either direction after earnings," said Nathan. "But it could be butting into some technical resistance at the 200-day moving average."

Nathan, who is long Twitter's stock, suggested investors buy some sort of near-term protection into Thursday's event.

Wall Street is expecting the company to report earnings of 6 cents per share and revenue of $453 million, according to FactSet.


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Host Bio

  • Melissa Lee

    Melissa Lee is the host of CNBC's “Fast Money” and “Options Action.”

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