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The shares of Facebook Inc (NASDAQ:FB) notched a new annual high of $41.94 earlier in the session, and were last seen lingering in the $41.36 neighborhood. In the options pits, traders are rolling the dice on even more upside for the shares, which sport a Relative Strength Index (RSI) of 78 -- in overbought territory, suggesting a pullback could be in the short-term cards.
So far today, FB has seen roughly 448,000 calls cross the tape -- almost double the norm. For the sake of comparison, about 139,000 puts have traded, versus its average intraday volume of about 105,000 puts. In light of the escalating demand, FB's 30-day, at-the-money implied volatility (IV) is up 4.3% at 35.4%.
Most popular is the weekly 8/30 42-strike call, which has seen more than 24,800 contracts change hands at a volume-weighted average price (VWAP) of $0.57. The majority of the calls have traded on the ask side, volume handily exceeds open interest, and IV was last seen 4.6 percentage points higher, hinting at newly bought bullish bets.
By purchasing the calls to open, the buyers expect FB to topple $42.57 (strike price plus VWAP) -- in territory not charted since IPO day -- by the end of the week, when the options expire. Risk, meanwhile, is limited to the initial premium paid for the calls, should FB remain south of the strike through Friday's close.
Elsewhere, one speculator is betting more aggressively, but allowing more time for his bullish prediction to pan out. Specifically, a block of 13,255 November 49 calls changed hands at the ask price of $1.16 apiece, implying they were likely bought. Plus, this strike is home to just 5,771 call contracts, suggesting today's calls were purchased to open.
In order to profit on the play, the buyer needs Facebook Inc (NASDAQ:FB) -- which is now promoting its Facebook Card -- to rally into record-high territory by the time November options expire. More specifically, the buyer will reap a reward if FB soars 21.3% to $50.16. Again, though, risk is capped at the initial premium paid for the deep out-of-the-money calls.