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Most Active Options Update: Facebook Inc (FB), Hewlett-Packard, B of A

FB, HPQ, and BAC are seeing notable options activity today

by 1/9/2013 12:17 PM
Stocks quoted in this article:

Of the 20 equities with the heaviest options volume in recent sessions, three names of notable interest this afternoon are Facebook Inc (NASDAQ:FB - 30.18), Hewlett-Packard Company (NYSE:HPQ - 15.72), and Bank of America Corp (NYSE:BAC - 11.79). Here is a quick look at today's interesting option activity in these options pits.

FB is trading nearly 4% higher today and has crossed the round-number $30 mark for the first time in half a year. Meanwhile, FB watchers are wondering what lurks behind a mysterious media invitation to "come and see what we're building" on Tuesday. On the options front, roughly 211,000 call contracts have traded today, nearly quadrupling typical intraday call volume. By comparison, just 73,000 puts have changed hands. The January 2013 30-strike call has seen more than 20,000 contracts trade, the majority of which crossed at the ask price. Rising implied volatility at this front-month strike also indicates some of these positions are being purchased to open. Also, the January 2014 35-strike call is active, as a block of 3,000 contracts changed hands at the ask price of $3.55 apiece. The latter is a long-term bet that FB will continue its upward trajectory over the next year. Breakeven, at expiration, would be $38.55 (strike plus premium paid), or just north of the stock's original IPO price of $38.

After hitting a 10-year low of $11.35 on Nov. 20, HPQ has been in recovery mode, tacking on nearly 39% since this time. Skepticism is still prevalent among analysts and option players, however, and today is no exception. The August 13 put is currently the most active HPQ option, as a block of 10,000 contracts traded on modest open interest of just 715. The block changed hands at the ask price of $0.78 per contract, suggesting it was purchased to open as a large-scale bet on a longer-term pullback in the shares. In order for these put buyers to be profitable at expiration, HPQ needs to be trading south of $12.22, which is a 23% drop from current levels. While these bearish speculators can sell out of their position at any time between now and expiration, delta for this put is currently -0.25, or 25%, indicating a 1-in-4 chance the stock will be trading south of the strike by the time expiration occurs.

Defying the broader market's uptrend, BAC is off roughly 2% today as more news emerges about the settlement agreement between federal regulators and members of the banking sector. Meanwhile, among BAC's many active option strikes is the weekly 2/1 11.5 put, where more than 14,000 contracts have traded, nearly all at the ask price. The volume has crossed the tape in large and mid-sized blocks, and may be the work of bearish traders speculating on short-term downside in the stock. The volume-weighted average price (VWAP) was $0.23, making the breakeven point $11.27 at expiration in roughly 3-1/2 weeks.

The 20 stocks below have attracted the highest options volume -- in the front three-months' series -- during the past 10 trading days. Data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White.

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