Stocks quoted in this article:
Option Brief: Facebook Inc (NASDAQ:FB) fell more than 5% to end at $59.49 yesterday, marking its lowest settlement since before its Jan. 30 bull gap. The shares -- dancing around breakeven in early action -- are now testing the waters atop their 20-week moving average, which hasn't been breached on a weekly closing basis since mid-2013. Meanwhile, options traders yesterday wagered on a short-term rebound for FB, with roughly 313,000 calls exchanged -- a 16% mark-up to the stock's average daily call volume -- compared to about 232,000 puts.
Jumping right in, FB's short-term options were in demand, as the stock's 30-day at-the-money implied volatility (IV) soared 6.8% to 64.8%. Most active was the April 60 call, where more than 18,600 contracts changed hands at a volume-weighted average price (VWAP) of $2.31. Most of the calls crossed on the ask side, IV grew 5.3 percentage points, and open interest increased by close to 7,600 contracts overnight, pointing to a healthy amount of newly bought bullish bets.
The buyers will reap a reward if FB is sitting north of $62.31 (strike plus VWAP) at the close on Thursday, April 17, when front-month options expire. To conquer this level, FB shares will have to take out their 10-day moving average, which has emerged as resistance since mid-March, and now sits at $61.50. Should FB end south of the strike, risk is limited to the initial premium paid for the calls. Delta on the calls dropped to 0.48 from 0.73 at Wednesday's close, suggesting the options have a roughly 50/50 chance of expiring in the money.
While the stock has been struggling on the charts of late -- similar to the Global X Social Media ETF (SOCL) -- off the charts, Facebook Inc's (NASDAQ:FB) proverbial dance card is filling fast. The firm is slated to report first-quarter earnings after the close on Wednesday, April 23, and will host its F8 Developer Conference on Wednesday, April 30, following a two-year hiatus. As my colleague Karee Venema noted yesterday, rumors are swirling that the social networking giant could unveil a new mobile advertising service.