Stocks quoted in this article:
Facebook Inc (NASDAQ:FB) options are trading at an accelerated pace this morning, with 127,000 contracts already on the tape, compared to an expected intraday volume of 96,000. Short-term strikes are being targeted, too, per the social network's 30-day at-the-money implied volatility (IV), which is 6.2% higher at 31.5%.
Garnering the most attention is FB's September 80 call, where almost 11,000 contracts have changed hands. Digging deeper, an 8,110-contract block at this strike was exchanged just after the open, at the ask price of $1.29 each, for a total cash outlay of just over $1 million (premium paid * number of contracts * 100 shares per contract). IV rose at the transaction, as well, hinting at newly bought bullish bets.
In short, today's call buyer expects FB shares to rally past the breakeven mark of $81.29 (strike plus premium paid) by the close on Friday, Sept. 19 -- when the back-month options expire. Additional gains will accrue with each step higher the equity is sitting, while the most the trader has to lose is the initial premium paid, should the stock finish below the strike at expiration.
Today's call buyers have a tough road ahead of them. Not only is the strike nearly 9% above the equity's current trading levels of $73.58 -- and in record-high territory -- but over the past week, FB has struggled to hurdle overhead resistance at the $75 level, which is home to peak front-month call open interest. As such, delta on the September 80 call is just 0.26, denoting a roughly 1-in-4 chance the contract will expire in the money.
On the news front, Facebook Inc's (NASDAQ:FB) Internet.org app launched in Zambia today. The effort is intended to extend Internet coverage to more of the world.