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Most Active Options Update: Facebook Inc (FB)

Facebook Inc call buyers might be betting on a post-earnings pop

by 7/21/2014 1:28 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), which seems to be attracting some bullish attention ahead of Wednesday night's earnings report.

Most Active Options Table

Facebook Inc shares have added 1.8% today to trade at $69.64, after Fidelity portfolio manager Will Danoff said FB remains one of the Contrafund's largest overweight positions. Meanwhile, it seems some options players are betting on the equity's rally to continue through the weeks ahead.

The social media stock's August 75 strike is the center of attention today, with roughly 12,800 contracts changing hands so far. About 77% of these calls have traded at the ask price, and implied volatility has edged up to 43.9%. What's more, data from the International Securities Exchange (ISE) confirms that some traders are buying to open new August 75 calls on FB today.

Those out-of-the-money calls crossed the tape at a volume-weighted average price (VWAP) of $1.19, which means today's buyers will profit if FB is trading above breakeven at $76.19 when August expiration rolls around. (Meanwhile, the stock's current all-time high -- tagged in March -- sits at just $72.59.)

In other words, these option bulls are looking for FB to surge more than 9.4% over the next four weeks until front-month expiration. Such a jump wouldn't be completely outside the realm of possibility for Facebook Inc (NASDAQ:FB); the company's second-quarter results are due out after the close this Wednesday, July 23, and FB has averaged a one-day post-earnings gain of 7.2% over the last eight quarters. However, delta on the stock's August 75 call is currently just 29% -- suggesting a less than one-in-three chance this call will expire in the money.


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