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Most Active Options Update: Facebook Inc (FB)

FB's October 55 call is seeing sell-to-open activity today

by 9/20/2013 2:28 PM
Stocks quoted in this article:

The 20 stocks below have attracted the highest options volume during the past 10 trading days. The companies highlighted are those that are new to the list since the last time the study was run. Data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White. Three names of notable interest this afternoon are Facebook Inc (NASDAQ:FB), Intel Corporation (NASDAQ:INTC), and Bank of America Corp (NYSE:BAC).

INTC is following the broad-market path lower today, prompting a rash of speculators to purchase (to open) the stock's December 22 puts Meanwhile, BAC is in the red on its last day as a blue chip. In the equity's options pits, it appears one trader is closing out of a put spread in the January 2014 series. Elsewhere, here is a quick look at the interesting activity in FB's options pits.


Facebook Inc (NASDAQ:FB) shares ran to another record high of $46.55 earlier in the session, thanks to some upbeat analyst attention. At last check, the stock had pared a portion of these earlier gains, but was still seen 0.4% higher to trade at $46.18. FB's unexpected rebound on the charts has garnered its fare share of attention on the Street, but one speculator in today's session is calling a top to the security's recent advance. Overall, option activity is trading at a 27% mark-up to the expected intraday volume. By the numbers, calls are outpacing puts by a more than 2-to-1 margin. One of the most active strikes on the day is the October 55 call, which has seen 19,942 contracts change hands. Roughly three-quarters of this volume occurred in one fell swoop, as a block of 14,655 calls was exchanged below the bid price for $0.17 per contract. Data from Trade-Alert indicates the position was sold to open.

Ideally, FB will remain south of the $55 mark through the close on Oct. 18. In this best-case scenario, the deep out-of-the-money calls will expire worthless, and the speculator can retain the initial net credit received as her full potential reward on the play. However, this could be indicative of a shareholder initiating a covered call strategy for one of two reasons. First, given FB's trek into uncharted territory, she could be looking to provide a cushion against any near-term consolidation. Second, she may simply want to increase her rate of return.

Regardless of the objective, the trader is getting more bang for her buck by selling to open this out-of-the-money call (as opposed to buying it). Implied volatility at this strike is currently inflated relative to the stock's 20-day historical (realized) volatility (42.9% vs. 39.2%), meaning premium is relatively expensive at the moment.


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