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Option Brief: Facebook Inc (NASDAQ:FB) jumped 4.6% yesterday to $65.77 -- its highest point since late March -- after the company lured the head of eBay Inc's (NASDAQ:EBAY) PayPal unit to join the team. While FB's June-dated calls were active in the first half of the session, one afternoon trader upped the bullish ante in the July series.
By the time the dust settled, FB had seen about 495,000 calls cross the tape -- more than twice the norm -- compared to around 173,000 puts. A healthy portion of the action transpired at the July 62.50 and 65 calls, where symmetrical blocks of 29,795 contracts crossed late in the session. The 62.50-strike calls traded for $4.74 apiece -- closer to the bid price at the time, suggesting they were sold. The 65-strike calls changed hands near the ask price at $3.27 each, implying they were likely bought.
Meanwhile, open interest at the lower-strike call depleted significantly overnight, pointing to liquidations. On the flip side, open interest at the July 65 call skyrocketed by more than 36,000 contracts, by far the most of any strike. Against this backdrop, it appears the trader rolled her position higher -- or, in simpler terms, sold to close the now in-the-money 62.50-strike calls, and used part of the proceeds to buy higher-strike calls in the same series. In other words, the speculator is gambling on FB to extend its journey north of $65 through the next few weeks.
Now is an opportune time for option buyers to gamble on Facebook Inc (NASDAQ:FB). The stock's Schaeffer's Volatility Scorecard (SVS) rests at 100, indicating the shares -- now up more than 20% year-to-date -- have tended to make outsized moves over the past year, relative to what the options market has priced in.