Stocks quoted in this article:
Facebook Inc (NASDAQ:FB) is once again among the most active equities in the options pits today, as more than 400,000 contracts have swapped hands. Leading the charge are the weekly 9/27 50-strike call and the October 50 call, as speculators target a breakout to record highs (or bet on short-term resistance).
According to International Securities Exchange (ISE) data, this pair of near-the-money strikes has seen activity on both the sell-to-open and buy-to-open fronts. Additionally, the majority of the volume at both strikes has gone off at the bid, volume outstrips open interest on the weekly call, and implied volatility has edged higher on the front-month position. (Overall, Facebook's 30-day, in-the-money implied volatility has spikedfrom 37.3% on Sept. 19 to 63.1% presently, as demand for options has grown.)
Those selling the calls to open are expecting FB to stay perched below the $50 level through the end of next week (or October options expiration in just over three weeks). If FB instead overcomes this level, call sellers will likely be on the hook to unload the shares for $50 each, no matter how high the stock might be trading.
Conversely, those who bought the calls are looking for a breakout above this level, and will profit with every step FB takes above breakeven, or the strike price plus the volume-weighted average price (VWAP) paid. For the options expiring this Friday, that VWAP was $0.40; for the October-dated calls, it was $1.67. Respective breakeven points are therefore $50.40 and $51.67, or 2.2% and 4.8% above the current price.
FB earned some positive attention on Wall Street this morning, and has subsequently tacked on 1.7% to trade at $49.31. Though the $50 level has proved insurmountable so far, it is barely out of reach. FB pegged a new all-time high of $49.66 yesterday, getting within mere pennies of the half-century mark.
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