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Option Clips: Facebook Inc (FB), Mosaic Co, and JA Solar Holdings

Reviewing notable options activity on Facebook Inc, Mosaic Co, and JA Solar Holdings Co., Ltd. (ADR)

by 4/1/2014 1:20 PM
Stocks quoted in this article:

Three equities generating buzz on StockTwits today are social networking concern Facebook Inc (NASDAQ:FB), potash producer Mosaic Co (NYSE:MOS), and alternative energy issue JA Solar Holdings Co., Ltd. (ADR) (NASDAQ:JASO). Here's a look at how traders have been aligning their speculative bets today.

  • Facebook Inc (NASDAQ:FB) -- which last night released 2013 salary numbers for its top execs -- is up 3.3% at $62.24, bringing its year-to-date gain to 13.9%. The stock just bounced off support at its 20-week moving average, and options traders are rolling the dice on more upside this week. So far today, about 135,000 FB calls have changed hands, compared to 76,000 puts. The security's now in-the-money weekly 4/4 62-strike call has seen apparent buy-to-open activity, with speculators hoping for an extended rally north of $62 through Friday's close, when the options expire. However, one cautious skeptic established a diagonal spread at the May 52.50 and June 60 puts, selling to open the former and buying to open the latter. The goal is for FB to remain atop $52.50 through May options expiration, and backpedal south of $60 before June options expire.

  • Mosaic Co (NYSE:MOS) initially ticked higher, touching an intraday peak of $50.41, but has since pulled back to trade 1% lower at $49.50. Overall options volume is running at twice the normal rate, with around 7,800 calls and 3,900 puts exchanged. Most popular is the near-the-money May 50 call, where nearly 2,200 contracts have crossed the tape, mostly at the ask price. Implied volatility is trending higher, and volume has surpassed open interest at the strike, hinting at newly bought bullish bets. By purchasing the calls at a volume-weighted average price (VWAP) of $1.76, the buyers will profit if MOS is sitting atop $51.76 (strike plus VWAP) when the back-month options expire. Delta for the calls is 0.47, implying a roughly 1-in-2 shot of the contracts landing in the money at the close on Friday, May 16. However, now is an opportune time to scoop up MOS' short-term contracts, as the stock's Schaeffer's Volatility Index (SVI) sits at an annual low of 19%.

  • Finally, JA Solar Holdings Co., Ltd. (ADR) (NASDAQ:JASO) has rallied 6.8% to $10.86, after Northland Securities initiated coverage of the stock with an "outperform" endorsement and $19 price target. Against this backdrop, call volume is running at three times the intraday average, with around 11,000 contracts traded. For comparison, fewer than 200 JASO puts have changed hands. Digging deeper, about half of the action has transpired at the April 11 call, the delta of which has soared to 0.48 from 0.32 at Monday's close. Today's affinity for short-term calls marks a change of pace for JASO, as the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.97 stands higher than 76% of comparable readings from the past year. In simpler terms, short-term options traders are more put-heavy than usual right now. Still, speculators can purchase JASO's short-term options at a historical discount, as the equity's SVI of 61% ranks in the 12th percentile of its annual range.

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