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Facebook Inc (FB) Option Bulls Not Giving Up

Facebook Inc traders are buying front-month calls at the 60 strike

by 4/30/2014 11:10 AM
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Option Brief: Facebook Inc (NASDAQ:FB) is once again garnering attention from option bulls today (though some of yesterday's activity may have been canceled by a computer malfunction at the exchanges). Intraday call volume is handily outpacing put volume, with speculators showing an affinity for short-term options. In fact, the stock's 30-day at-the-money implied volatility (IV) is 2.9% higher at 42.2%.

Most popular thus far is the May 60 call, where more than 9,400 contracts have changed hands at a volume-weighted average price (VWAP) of $1.23. The majority of the calls have traded on the ask side, and IV was last seen 2 percentage points higher, hinting at newly bought bullish bets.

The buyers will reap a reward if FB is trading north of breakeven at $61.23 (strike plus VWAP) by the close on Friday, May 16, when front-month options expire. Delta on the call sits at 0.40, implying a roughly 40% chance of an in-the-money finish at expiration. Risk, meanwhile, is limited to the initial premium paid for the calls, should FB remain south of the strike through the option's lifetime.

Facebook Inc (NASDAQ:FB) is no stranger to optimism, though, as 31 out of 34 covering analysts offer up "buy" or better endorsements. On the charts, the shares have underperformed the S&P 500 Index (SPX) by nearly 16 percentage points during the past two months, and were last seen fractionally higher at $58.27. The equity has backpedaled almost 20% since touching an all-time acme of $72.59 on March 11, and an extension of this retreat could spark a reversal in sentiment among option bulls and/or a flood of downgrades -- both potential catalysts into the red.


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