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Facebook Inc (FB) Speculators Expect Short-Term Rebound

Traders are picking up Facebook Inc's weekly 5/2 58-strike call

by 4/29/2014 11:14 AM
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Facebook Inc (NASDAQ:FB) call volume almost doubles put volume this morning. By the numbers, roughly 80,000 calls are on the tape, versus 41,000 puts. Not surprisingly, eight of the 10 most active strikes are on the call side of the aisle.

Leading the way is the social network's weekly 5/2 58-strike call. More than 7,200 contracts have traded here on open interest of 4,707, and implied volatility is on the rise, suggesting new positions have been opened. Moreover, the majority of the activity has transpired at the ask price, indicating a healthy portion of these FB calls were likely purchased.

In a nutshell, today's call buyers expect Facebook shares -- 1.4% higher this morning at $56.92 -- to keep charging north and topple $58 by the end of the week, when the options expire. Delta on the contract is 0.36, conveying a 36% chance of an in-the-money finish at Friday's closing bell. However, even if the stock stalls south of the strike through then, the traders will part with just their initial cash outlay.

Taking a step back, this morning's gains notwithstanding, FB has been struggling on the charts. Since hitting an all-time high of $72.59 on March 11, the shares have shed nearly 22%. On a related note, the stock has underperformed the S&P 500 Index (SPX) by almost 18 percentage points in the past two months.

Nevertheless, the brokerage bunch is decidedly bullish on Facebook Inc (NASDAQ:FB). In fact, 31 out of 34 covering analysts have doled out "buy" or better ratings on the equity, and the stock's 12-month price target sits at a lofty $77.76 -- almost 37% above current levels. Should the shares continue to move lower, however, a change of tune on Wall Street -- in the form of downgrades and/or lowered price targets -- could intensify selling pressure on FB.


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