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Most Active Options Update: Facebook Inc (FB)

How option traders are playing calls on Facebook Inc

by 2/28/2014 2:09 PM
Stocks quoted in this article:

The 20 stocks listed in the table below have attracted 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 of notable interest this afternoon is Facebook Inc (NASDAQ:FB).


Facebook Inc is once again seeing a slight uptick in put volume, with the contracts trading at a 21% mark-up to average intraday levels. A healthy portion of these speculators are of the eleventh-hour variety, as the three most active puts expire at tonight's close. By the numbers, though, calls are the options of choice, and at last check, roughly 202,000 calls have changed hands, compared to around 124,000 puts.

The most active call that isn't expiring at tonight's close is the March 70 strike, where 19,724 contracts are on the tape. This action is occurring on both the bid and the ask side -- and implied volatility was last seen higher -- suggesting a mix of both sell- and buy-to-open activity, respectively. This theory is confirmed by data from the International Securities Exchange (ISE).

By selling to open the out-of-the-money calls, speculators expect FB -- currently perched at $68.95 -- to remain south of the $70 mark through the close on Friday, March 21, when front-month options expire. Conversely, the buyers of the calls are betting on FB to move north of the strike price over the next three weeks.

Meanwhile, FB's March 77.50 call has caught the eye of one trader in particular. Shortly after the open, a large block of 2,000 contracts traded at this strike at the ask price of $0.53 each. IV rose at the transaction, and volume outstripped open interest, pointing to the initiation of new positions. Should Facebook fail to topple the $77.50 level over the next three weeks -- a feat yet to be accomplished -- the most the speculator stands to lose is the initial premium paid. This equates to $106,000 (number of contracts, times premium paid, times 100 shares per contract).

In today's session, the stock is hovering around breakeven. It's not too shocking to see Facebook Inc (NASDAQ:FB) taking a quick breather, though, considering the equity tagged a record peak of $71.44 on Tuesday.


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