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Most Active Options Update: Facebook Inc (FB) and Microsoft

FB and MSFT are seeing notable options trading activity today

by 1/22/2013 12:14 PM
Stocks quoted in this article:

Of the 20 equities with the heaviest options volume in recent sessions, two names of notable interest this afternoon are Facebook Inc (NASDAQ:FB - 30.73) and Microsoft Corporation (NASDAQ:MSFT - 27.13). Here is a quick look at today's interesting activity in these options pits.

Option volume is again outpacing average levels in FB, and speculators are active on both side of the aisle. At last check, call volume was running 42% ahead of what's expected on an intraday basis, while put volume has exceeded typical levels by 45%. The most active option trading today is the near-the-money 1/25 31-strike call, with more than 14,000 contracts trading on open interest of just under 9,000. While the action is a mix of buying and selling, the slight majority of the volume has traded at the ask price, suggesting at least some of these are being purchased to open in the hopes that FB rallies during the remainder of the week. The volume-weighted average price of this weekly option is $0.37, making the breakeven price $31.37. In order for these call buyers to profit, FB needs to surmount the $31.37 mark by this Friday's close, which is when the short-term options expire. Short-range bullish traders may be looking to bet on FB ahead of the company's earnings report, which is expected next Wednesday.

With earnings due later this week, MSFT has attracted the attention of option traders today, as both call and put volume is outpacing what's typically expected by around 50%. More than 20,000 contracts have traded on the January 2014 30-strike call, 17,055 of which crossed the tape as one block about an hour into the trading day. This large trade was executed at the bid price of $1.03 per contract, suggesting it may have been sold to open. Potentially part of a covered call strategy, this trade allows the call seller to book a credit at the outset of the trade, which is retained as profit if MSFT is not trading north of the strike price when the options expire in a year. (Also, the trader can buy to close this block at any time between now and expiration.) MSFT is currently trading 9.6% below the 30 strike but last visited this round-number level as recently as early November.

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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