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Option Brief: With Facebook Inc (NASDAQ:FB) now sitting solidly above the $50 threshold, options players are setting their sights on the next round-number target. Most active in today's options trading is the November 65 call, as aggressive bulls bet on short-term upside.
Nearly four-fifths of the more than 23,000 contracts trading at this out-of-of-the-money strike have crossed at the ask price, and the International Securities Exchange (ISE) confirms that the lion's share of these orders were bought to open by customers. FB shares have never traded above $54.83 -- a new record peak hit on Friday -- but these bets target near-term gains of 20.6% from the stock's current perch at $53.89.
If FB doesn't manage to hurdle through $65 during the options' four-week life span, the call buyers have merely risked the premium paid. One call buyer in particular has put a lot on the line -- a single block of 16,877 contracts traded at the ask price of $1.40 apiece, making the entire position worth $2.36 million (number of contracts, times the premium, times 100 shares represented by each contract). Delta for the option stands at 0.22, meaning the calls will increase by 22 cents in value for every $1 increase in the underlying -- all other factors being equal -- and will lose 22 cents for every $1 FB falls.
As noted by my colleague Elizabeth Harrow earlier today, Facebook has been a favorite among bullish options speculators for the last couple of weeks, despite an increase in options prices. Implied volatility (IV) at the November 65 call strike has spiked nearly 10 percentage points so far today, while overall 30-day, at-the-money IV is up 4.9 percentage points, or 7%, at 75.6%.
IV is likely on the rise with earnings due after the closing bell on Wednesday, Oct. 30. For the third quarter, analysts have projected a per-share profit of 18 cents, or 6 cents better than FB's year-ago showing. Reviewing its five historical turns in the earnings confessional, Facebook Inc (NASDAQ:FB) has matched estimates once, missed once, and exceeded on the remaining three occasions. What's more, FB has surged by an average of 8.4% in the day after issuing its results.
Visit our Facebook Inc (NASDAQ:FB) quote page for additional analysis and indicators.