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Why Twitter could surge in the next month

A Twitter rally is ahead, at least according to traders who believe the stock is on track to recovering from what has been a dismal year for the social media giant.

"Options traders have been speculating for a long time that a deal might take place, and all year, long calls have outpaced puts about 3 to 1," Mike Khouw of Optimize Advisor said Wednesday on CNBC's "Fast Money."

The options pit on Wednesday was no different as traders piled into the Twitter trade. Approximately 4,000 October 22-strike calls were bought for an average price of 80 cents, or $80 per options contract by traders. Traders who bought the calls expect Twitter to be above $22.80 by October expiration.

This means that Twitter would have to jump over 15 percent in just over six weeks, just a few days before the stock would report earnings.

The stock plunged more than 3 percent Thursday morning off of uncertainty over the company's board meeting later in the day. Rumors of an acquisition have swirled in Twitter's sphere for the past few months, and investors are waiting to see if they prove to be true.

The social media giant is current down more than 17 percent this year, but has been in an uptrend since June — surging 30 percent.

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  • Melissa Lee

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

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