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Facebook Inc (FB) Bears Pounce as Pullback Drags On

A large block was purchased to open on the Facebook Inc June 55 put

by 5/7/2014 2:18 PM
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Option Brief: After a pronounced swoon in the social-media sector yesterday, the sell-off is continuing today. Facebook Inc (NASDAQ:FB) is not immune to the downside pressure, losing nearly 3.3% to perch at $56.62. Traders have once again taken to the options pits to place bets, making FB the second most active equity in the options-trading world today. The equity's 30-day at-the-money implied volatility (IV) has risen more than 6%, amid escalating demand for short-term options.

Unlike yesterday's trend toward optimism, however, much of today's action is centered on the put side of the aisle. Put volume is currently slightly above normal intraday levels, while call volume is lagging its average pace. Among the most active strikes -- and responsible for today's largest single option trade -- is the June 55 put, where a block of 6,200 contracts traded off the ask price of $1.93 shortly after the opening bell. A total of nearly 9,700 contracts has crossed the tape at the strike today, 80% off the ask, and data from the International Securities Exchange (ISE) indicates that the early morning trade was, in fact, purchased to open.

Less than an hour later, a block of more than 4,000 May 55 puts was sold to close (per the ISE). It's not out of the question that this was a single trader closing front-month bearish bets and opening a larger block of the further-dated options. Either way, the purchase of the June 55 puts represents a bet that FB will continue on its path lower through the next six-plus weeks until the options expire. The shares have not closed a session below $55 since late January, but risk for the long put buyer is limited to the initial premium paid.

Facebook Inc (NASDAQ:FB) bulls, meanwhile, are not going down without a fight. Most active across all strikes today is the May 57.50 call, where more than 16,200 contracts have traded. Volume exceeds open interest, the majority of the trades went off the ask price, and IV has ticked higher. Collectively, this action is reflective of buy-to-open activity.


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