On Monday, the market got off to gloomy start for the new week as the Dow Jones Industrial Average (DJIA) saw its greatest one-day point fall since Sept 20.
The Dow fell 179.1 points (1.09%) to 16,257.94 while the?S&P 500 (SPX) dropped 23.17 points (-1.26%) to 1,819.20. This represented its biggest one-day point fall since Nov 7. The?Nasdaq?Composite (COMP) fell 61.36 points (-1.47%) to close at 4,113.30–its largest one-day point drop last seen on Nov 7.
The VIX closed at 13.28, up 1.14 (9.39%).
Earlier in the trading day, Twitter Inc. (TWTR) was wreaking havoc but this time it came on the Russell 1000 index. With the company’s first quarterly earning’s report not due until Feb. 5 and its surging share price, the cost of protecting volatility is higher than all other companies in the index except one, reported Bloomberg.?
On January 10, Twitter’s implied volatility was?93.030– triple as compared to the average for the Russell 1000’s stocks. Ariad Pharmaceuticals Inc. was the only stock to be higher, according to ?Bloomberg.?
This comes as investors have doubts on whether Twitter will deliver in its quarterly report, causing investors to hedge. Kurt Ayling, a technology, media and telecom desk analyst at Susquehanna Financial Group LLLP, said via Bloomberg,?There?s a lot of uncertainty around the stock so people are, for the most part, using options to hedge or outright short the stock. Sentiment around the stock has changed a lot at the start of this year as people quickly shifted gears, and all of a sudden valuation concerns became a major part of the story.?
Also on Monday, Goldman Sachs analysts raised their price target to $65 from $46. Twitter shares jumped on the news and for the day, the stock closed at $57.82, up 0.82 (1.44%).
Twitter options actively traded with 149,001 contracts changing hands (59% calls, 41% puts).