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Most Active Options Update: Facebook Inc (FB), Netflix, and Ford Motor

FB, NFLX, and F are seeing notable options activity today

by 1/28/2013 1:16 PM
Stocks quoted in this article:

Of the 20 equities with the heaviest options volume in recent sessions, three names of notable interest this afternoon are Facebook Inc (NASDAQ:FB - 32.49), Netflix, Inc. (NASDAQ:NFLX - 169.07), and Ford Motor (NYSE:F - 13.73). Here is a quick look at today's interesting option activity in these options pits.

Options players are gearing up for FB earnings -- due after the close on Wednesday -- and are preparing for the event via more than one strategy. Some skeptics are scooping up long puts -- a block of 10,000 June 30 contracts traded at the ask price of $2.17 per contract, while another block of 5,000 April 30 puts changed hands at the ask price of $1.50 each. This bearish speculation could also be the work of shareholders looking to hedge their positions in case of an earnings-related pullback. The shares have gained almost 22% in 2013 so far, and are up 72% from their Nov. 12 low of $18.87. Today, the shares have gotten an added boost on the heels of an upgrade from Raymond James. On the call side of the aisle, the June 37 strike is active, as a block of 8,428 contracts crossed the tape at the ask price of $1.71. The delta of this option has risen to 34% today, meaning the options market is giving FB a 34% chance of overtaking the 37 strike by the time June options expire. Analysts, on average, are expecting FB to report profits of 15 cents per share for the latest quarter. In its last two visits to the earnings confessional (FB's only reports since its public debut last May), the social-networking company managed to narrowly exceed the Street's estimates.

With NFLX cruising to another new annual high of $177.25 earlier today (the stock has since dipped below breakeven), the options pits have livened up. In fact, both call and put volume have roughly doubled typical intraday levels so far. Many of the stock's most active options today are of the weekly variety, and will expire at the close of trading this Friday. The 2/1 190-strike call, for instance, has seen more than nearly 5,400 contracts cross the tape. The majority of the volume traded at the ask price, open interest was nonexistent at the start of today's session, and data from the International Securities Exchange (ISE) suggests at least some of the orders have been bought to open. The volume-weighted average price (VWAP) for this option today has been $2.79, so breakeven at expiration is $192.79 (strike price plus VWAP). In other words, NFLX needs to rally more than 14% in the next five days in order for today's weekly call buyers to be profitable. The current delta gives a 13% chance of that happening. Long call buyers, however, only risk 100% of the premium paid, should the underlying stock fail to rally within the allotted time.

Finally, F was downgraded to "underperform" from "neutral" at Buckingham shortly ahead of the open, but has managed its way into positive territory nevertheless on its ex-dividend day. Although the company reports earnings in a matter of hours (ahead of tomorrow's open), some speculators are looking longer term. Among the most active F options trading today is the January 2015 12-strike put, where almost 9,600 contracts have traded (nearly all at the bid price). Volume exceeds open interest, and ISE data indicates that much of the volume has been bought to open (despite being priced at the bid). The breakeven price at expiration in almost two years is $10.42, or the strike price less the VWAP of $1.58. Between now and then, however, the traders can sell out of their position at any time to take profits of the table or cut losses. Puts have been popular on F of late -- the ISE, Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) 10-day put/call volume ratio of 0.49 is higher than 94% of the past year's readings. In other words, option buyers have been scooping up more puts than usual during the past two weeks.

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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