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Call Volume Accelerates as Facebook Inc (FB) Tags Another New High

However, some option traders are calling a top for Facebook Inc

by 2/3/2014 11:32 AM
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Option Brief: Facebook Inc (NASDAQ:FB) touched a new record high of $63.77 this morning, but is now flirting with a 0.4% loss at $62.34. Against this backdrop, calls are once again the options of choice today, with roughly 126,000 contracts exchanged -- a 36% mark-up to the stock's average intraday call volume, and more than twice the number of FB puts traded. Furthermore, 30-day at-the-money implied volatility on the stock is up 4.6% at 40.9%.

Short-term traders are gambling on even higher highs for FB. The stock's weekly 2/7 64-strike call has seen north of 6,700 contracts change hands -- mostly at the ask price, suggesting they were bought. Plus, volume has exceeded open interest at the strike, and implied volatility on the option is up 11.3 percentage points, hinting at fresh initiations. By purchasing the calls to open, the traders expect FB to surmount $64 -- a feat not yet accomplished by the stock -- before the end of the week, when the options expire.

Meanwhile, longer-term traders may be using calls to call a top for FB. The equity's out-of-the-money March 67.50 call has seen more than 11,000 contracts change hands on open interest of just over 7,700 contracts, and the International Securities Exchange (ISE) confirms a healthy portion of the calls were sold to open. By writing the calls to open, the traders expect Facebook Inc (NASDAQ:FB) shares to remain south of $67.50 through options expiration on Friday, March 21.


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