Schaeffer's Trading Floor Blog

Options Check-Up: Facebook Inc (FB), Twitter Inc, and Amazon.com, Inc.

Analyzing recent option activity on FB, TWTR, and AMZN

by 8/7/2014 7:39 AM
Stocks quoted in this article:

Among the stocks attracting attention from options traders lately are social media giant Facebook Inc (NASDAQ:FB), microblogging specialist Twitter Inc (NYSE:TWTR), and online retailer Amazon.com, Inc. (NASDAQ:AMZN). Below, we'll break down how options buyers are positioning themselves, and how much speculators are willing to pay for their bets on FB, TWTR, and AMZN.

  • FB has been drifting steadily lower since peaking at $76.74 on July 24, with the stock down 5.6% since then to trade at $72.47. Meanwhile, according to data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), call options on Facebook Inc (NASDAQ:FB) are less popular than usual. The stock's 10-day call/put volume ratio of 2.19 registers in just the 32nd percentile of its annual range -- suggesting the recent pace of call buying, relative to put buying, has been slower than the norm for FB. However, now is a fine time to buy short-term bets on the stock, as its Schaeffer's Volatility Index (SVI) of 29% ranks below 95% of other such readings from the past 12 months. In other words, front-month contracts have priced in lower volatility expectations only 5% of the time.

  • During the past 10 days, options traders on the ISE, CBOE, and PHLX have bought to open 1.43 calls for every put on TWTR. While bullish bets have outnumbered their bearish counterparts, the current ratio is well below the all-time high of 3.31 reached on June 13. Shares of Twitter Inc (NYSE:TWTR) have backpedaled since hitting a near-term peak of $48.00 in late July, and the stock is currently sitting on a year-to-date loss of 31.7% at $43.46. As with FB, front-month options on TWTR have rarely been cheaper, from a volatility standpoint. The stock's SVI weighs in at just 42%, in the low 9th percentile of its annual range.

  • Speculative players have rarely been more bearish on AMZN during the last year, as the stock's 10-day ISE/CBOE/PHLX put/call volume ratio of 1.30 outranks 99% of other such readings taken over the past year. Shares of Amazon.com, Inc. (NASDAQ:AMZN) tanked on July 25 after earnings, but have recovered from their post-report lows near $305 to trade at $313.89. Short-term puts and calls on AMZN are fairly priced right now, on a volatility basis, as the equity's SVI of 28% arrives in the modest 23rd annual percentile.

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