Musk Revives Twitter Offer At Original Price, Traders Bet On 80% Probability Of The Deal Closing This Time

On CNBC's "Options Action," Michael Khouw of Optimize Advisors said that Twitter Inc. TWTR traded well over 2 times its average daily call volume on Tuesday.

Check out other stocks making moves in the premarket.

There were buyers of 30,077 of the October 7 weekly 55 and over 16,000 of the 54 calls at an average price of 69 cents per contract, Khouw mentioned. Traders expect Twitter’s shares to finish the week higher, he added.

Also Read: Private Sector Employment Jumps By 208,000 In September, Topping Expectations: What Investors Need To Know

"This is a pretty conventional trade that you will typically see in merger situations, once there’s greater certainty that a deal is going to close. Risk arbitrage participants will buy the stock and sell calls at the strike that is on or slightly above the deal that is expected," Khouw stated. Traders estimate the probability of the Twitter deal closing at over 80%, he added.

TWTR Price Action: Shares of Twitter climbed by 22.09% to close at $52.00 on Tuesday.