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With September options expiration looming, some Facebook Inc (NASDAQ:FB) call traders are heading for the exits today. The most active strike in the FB option pits is currently the out-of-the-money September 46 call, where nearly 40,000 contracts have changed hands. Roughly three-quarters of this volume has traded off the ask price, but the action is not as bullish as it might seem at face value.
Data from the International Securities Exchange (ISE) indicates that close to half of this volume consists of customers selling to close their short calls. Although Facebook shares have never traded north of $46, a move above this level in the next two-plus days could prompt assignment. Today's call sellers may wish to avoid this outcome, which would result in the obligation of delivering the shares for $46 apiece, no matter how high the stock is trading.
A small fraction of this front-month volume was sold to open. These investors, contrarily, are counting on FB staying below $46 through Friday's close. At this point, the calls expire worthless, allowing the call sellers to keep the credit collected -- the volume-weighted average price of $0.36 -- as profit.
Based on the call's current delta of 0.26, the options market is pricing in a roughly 1-in-4 chance these options will be in the money by the time they expire. This reading has dropped from 0.31 at yesterday's close, as Facebook Inc (NASDAQ:FB) shares have dipped slightly to $44.86 despite earning a price-target hike earlier today.
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