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Call activity is running hotter than usual on Facebook Inc (NASDAQ:FB) today, with around 122,000 contracts crossing the tape so far -- a 31% mark-up from the norm, and almost triple the number of puts exchanged. However, not all of this call volume is of the bullish variety, as at least one trader seems to be betting on the stock to remain relatively stagnant throughout the summer.
Delving deeper into the data, close to 15,300 calls have changed hands at the August 29 strike -- a large block of which traded at a bid price of $0.56 each, suggesting they were sold. Meanwhile, this option is presently home to open interest of just 97 contracts, pointing to the initiation of new positions. By selling these calls to open, the speculator is betting on FB to remain south of $29 through August expiration. This would render the options worthless, and allow him to pocket the initial premium received for his call sales.
It's also worth noting that this activity could be the work of a shareholder writing covered calls in an effort to generate some extra income, or perhaps pick up some downside protection. In the event that these contracts would move into the money, the call writer would be at risk for assignment. However, the market seems to think there's a less than 1-in-4 chance of that coming to fruition, as the delta for these options is docked at 0.23.
Facebook Inc calls were popular prior to today's session, however, albeit in a more traditional sense. In fact, the equity's 20-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio checks in at 2.49, indicating traders have bought to open twice as many calls than puts during the past month. Plus, the Schaeffer's put/call open interest ratio (SOIR) of 0.64 sits just 1 percentage point from an annual low, implying that short-term speculators have rarely been more call-heavy. An unwinding of these out-of-the-money bullish bets -- particularly within June series of options -- could end up pressuring the shares lower in the near term.
From a technical perspective, the social networking site has been sluggish lately, shedding about 5.5% year-to-date, and more than 21% on a year-over-year basis. On the charts, the stock remains below its 10-day moving average, which has acted as resistance for the past few weeks.
At last check, FB remains nearly flat with yesterday's close of $25.16.