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Facebook Inc (FB) Bears Bet on a Short-Term Slide

Front-month traders expect FB shares to drop over the next month

by 11/25/2013 10:07 AM
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Option Brief: Weekly options were the most active strikes on Facebook Inc (NASDAQ:FB) last Friday, as traders focused in on the expiring 11/22 series. However, the most active non-weekly option was FB's December 45 put, where 10,803 contracts changed hands by the end of the day.

About 80% of these front-month bets traded at the ask price, suggesting most of the volume here was buyer-driven. Implied volatility ticked up 1.7 percentage points to 39.0%, and open interest at the December 45 strike rose over the weekend by 3,596 puts. This confirms that traders added new bearish bets on FB in Friday's session.

Shares of Facebook Inc (NASDAQ:FB) are currently trading at $44.14, which means these put options are in the money by a modest amount. In order to profit from their plays, Friday's put buyers need FB to extend its move below $45 over the next four weeks until December options expiration.

From a broader perspective, puts are becoming more popular on FB. During the past 10 days, speculators on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open 0.47 put for every call on Facebook Inc. This ratio arrives in the 76th percentile of its annual range, revealing a stronger-than-usual skew toward bearish options over their bullish counterparts.


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