By Saqib Iqbal Ahmed
NEW YORK (Reuters) - Dick Costolo's decision to step down as Twitter Inc's chief executive last week failed to stem the weeks-long slide in the company's shares, but options traders appear to be betting on a near-term rebound.
The stock has shed more than a third of its value since Twitter reported first-quarter results in April. It edged up 6 cents to $34.62 on Thursday, after touching a year-low of $33.51 on Tuesday.
On June 11, Costolo said he would resign as CEO under pressure from investors frustrated by the microblogging company's slow growth, but the move failed to prop up Twitter's shares.
Options traders seem to be focusing on the near-term and may be looking for something like a takeover bid to make the stock jump, strategists said.
"It seems that everyone and their uncle is betting that Twitter will be bought by another firm," said Steven Place, founder of options analytics firm investingwithoptions.com in Destin, Florida.
Since May, open interest in calls, usually used for bets on the shares rising, has swelled at a faster pace than the open interest in puts. For every open put contract, 1.7 calls are open, the most bullish for this ratio since early March.
Traders have bid up near-dated options, with the demand for upside reflected in options skew - the difference between expectations for volatility priced into puts versus calls.
Normally, puts tend to have a higher premium relative to calls, because people are willing to pay more to protect against risk of losses. For Twitter, calls have become more expensive than puts.
"The upside skew in Twitter most likely reflects the possibility of an upside event between now and July expiration," Place said.
That might not necessarily mean that traders are bullish on the stock, but it does suggest investors want to own upside calls in case of a takeover, said Pravit Chintawongvanich, derivatives strategist at Macro Risk Advisors in New York.
Twitter's second-quarter results, due toward the end of July, could be another reason for near-dated options to be bid, Chintawongvanich said. The stock is usually volatile after reporting results, with average one-day moves of 15 percent.
That co-founder Jack Dorsey is taking over from Costolo only on an interim basis has left some analysts wondering if it is a signal for a potential acquisition of the company.
Twitter has denied that it is in talks to be acquired.
(Reporting by Saqib Iqbal Ahmed; Editing by Richard Chang)