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Facebook Inc (FB - 30.23) options began trading today, seven trading days after the stock's highly publicized but largely disastrous initial public offering on May 18. Here are some points option speculators should know.
- FB options are currently available for eight expiration cycles: June, July, August, September, December, January 2013, March 2013, and January 2014. Strike prices – while initially intended to range from $16 to $49 – now range from $10 to $50. That's $20 below and above the stock's current price, representing a downside or upside swing of 66%. The strikes move in a $1 increment.
- Puts are outnumbering calls, 67,000 to 51,000. This is not surprising, as bears may be looking for a way to bet against the shares but are unable to short them. The stock is off almost 5.5% today and has lost more than one-fifth of its value from its out-of-the-gate price two Fridays ago.
- Out-of-the-money calls are the most popular option type today, at 43,000 contracts traded. Second place goes to out-of-the-money puts, with 31,000 contracts changing hands. In-the-money and at-the-money put volume easily trumps call volume, however, resulting in the high put/call ratio as noted above.
- The most-active strike, not surprisingly, is the front-month, at-the-money June 30-strike put. More than 11,000 contracts have traded, with 41% going off at the ask price, 38% at the mid, and 21% at the bid price. Implied volatility of this option is approximately 62%. Second is the June 34 call, with 7,800 contracts (39% ask, 39% mid, 22% bid).
- The largest block trades have gone off at the July 25 and 32 puts, both of which saw blocks of 3,050 change hands just after 10:00 a.m. Eastern. The 25 put traded below the bid price at $0.75 each and the 32 put traded at the mid price of $3.70 apiece. Traders could be opening a bear put spread by selling the lower-strike put and buying the higher-strike put, paying a net debit of $2.95. The maximum loss for this strategy is the debit paid; the maximum potential gain is $4.05 per spread, should FB drop below the 25 strike by expiration.
- Current volume indicates we could hit 400,000 by the end of the trading day. According to Henry Schwartz from Trade-Alert.com, that would make it the best first-day listing in options history.