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Most Active Options Update: Facebook Inc (FB)

Facebook Inc option buyers are betting on higher highs

by 2/21/2014 1:55 PM
Stocks quoted in this article:

The 20 stocks listed below have seen the highest total options volume during the past 10 trading days. Names highlighted are new to the list since the last time the study was run, and data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White. One name seeing a decent amount attention from last-minute traders is Facebook Inc (NASDAQ:FB).

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FB touched a record high of $70.11 yesterday, as traders weighed the company's multi-billion-dollar buyout of messaging start-up WhatsApp. Today, however -- and in spite of an early price-target boost -- some traders are taking profits, with the shares down 0.3% at $69.40.

Nevertheless, option players are rolling the dice on more upside for the social networking titan. Roughly 388,000 FB calls have changed hands so far, more than doubling the stock's average intraday volume. For comparison, just 157,000 FB puts have crossed the tape. Against this backdrop, the security's 30-day at-the-money implied volatility (IV) is 5.2% higher at 42.8%, underscoring the demand for short-term options today.

With February-dated options expiring in just a few hours, bulls are honing in on March- and April-dated calls. Most active have been the March 70 and April 75 calls, where about 53,000 and 39,000 contracts have traded, respectively. The majority of the calls have traded on the ask side, volume has outstripped open interest at both strikes, and IV on both options is on the rise -- all signs of buy-to-open activity. In fact, data from the International Securities Exchange (ISE) confirms the initiation of fresh bullish bets.

Buyers of the March 70 calls are expecting FB to extend its quest for new highs, rallying back atop $70 within the next four weeks. In the same vein, the April 75 call buyers have even higher expectations, gambling on the stock to surmount $75 before the options expire at the close on Thursday, April 17. However, should FB stage a retreat within the options' respective lifetimes, the most the buyers will forfeit is the initial premium paid for the contracts.

Currently, Facebook Inc (NASDAQ:FB) sports a Schaeffer's Volatility Index (SVI) of 41%, in the relatively tame 29th percentile of its annual range. In other words, the security's short-term options are attractively priced right now, from a historical standpoint. Likewise, the equity's Schaeffer's Volatility Scorecard (SVS) of 93 indicates that FB has tended to make outsized moves over the past year, relative to what the options market has priced in.


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