With only a few days of data, it's a bit early to hold any strong opinions about the likely trading range for



over the next few months. That didn't stop investors from trading 110,000 contracts on Monday. With 33 days to expiration, the December at the money puts were priced at the close of trading with an implied volatility of about 51%.

The most active contract was the December 50 calls, which traded 5,700 times during the session. Interestingly enough, most of that activity appeared to be in small lots, and most trades appeared to be call sales. Given TWTR intraday high of $50.09 on November 7, those short call trades were effectively bets that the stock wouldn't be surging to new highs anytime soon.

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As for the valuation of those options, the best estimate we have so far is the volatility of the stock. Bucketing the data into hourly segments, we find that the 20-period annualized realized volatility of the shares has fallen steadily, from nearly 80% in the first few days of trading to about 40% by the Monday close. That makes options priced at 50% and higher seem expensive. Of course, if shares continue to slide, we will see a real test of of the truth of the rumor that IPO shares were allocated to funds that promised to have a "holding" mentality.

I don't own any shares yet, and these put premiums seem like a decent sale opportunity with a worst-case outcome of a new stock position. Investors who aren't used to naked put sales or who aren't interested in owning the underlying might be better advised to wait, but for everyone else:

Trade: Sell to open TWTR January 36 puts for $1.50.

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At the time of publication, Jared Woodard held no positions in the stocks or issues mentioned.