Are 'FANG' Stocks Flashing a 'Buy' Sign for Options Traders?

Recent pullbacks for "FANG" stocks have found technical support, and near-term options buyers could find a relative bargain

Nov 23, 2016 at 11:37 AM
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So-called "FANG" stocks -- that is, Facebook Inc (NASDAQ:FB), Amazon.com, Inc. (NASDAQ:AMZN), Netflix, Inc. (NASDAQ:NFLX), and Alphabet Inc (NASDAQ:GOOGL) -- have received some extra attention of late, dipping in the wake of Donald Trump's surprise election win, and being hailed by some analysts as particularly good buys. All four tech stocks hit notable peaks in October, and each has since pulled back to a supportive technical level. Plus, with the options market pricing in unusually low volatility expectations at the moment, this could be a prime time for near-term options buyers to score a bargain on FB, AMZN, NFLX, and GOOGL.

FB is down 1.2% at $120.04, on news the company is redoubling its efforts to break into the China market by creating a censorship tool in order to adapt to the country's internet standards. Since tapping its late-October record high of $133.50, the shares have pulled back to support at the 50-week moving average -- which has kept Facebook Inc shares' downward moves in check since it first formed in mid-2013. Speculators could be getting a good deal on the stock's short-term options, as its Schaeffer's Volatility Index (SVI) of 21% ranks in the 20th percentile of its 12-month range -- meaning premium is currently well-priced, from a volatility standpoint.

Reports that a pilots' strike at Air Transport Services Group Inc. (NASDAQ:ATSG) could disrupt holiday shipping has AMZN 1.4% lower at $773.98 today. However, the stock could stand to benefit from some of the year's busiest shopping days -- Black Friday and Cyber Monday. AMZN also hit a record high of $847.21 in October, and has since pulled back to support at the 40-week moving average. Plus, the shares are still sitting on a healthy 14.5% year-to-date lead. With an SVI of 22% that ranks lower than 80% of the past year's readings, and a 30-day at-the-money (ATM) implied volatility (IV) of 22.4% -- in just the 19th annual percentile -- Amazon.com, Inc. appears to be presenting an attractive opportunity for short-term options buyers.

NFLX is off 0.2% at $117.84, despite a bullish outlook from RBC, which predicts subscriptions could grow beyond 160 million by 2020. But things could be looking up soon -- historically, the stock is among the top S&P 500 Index (SPX) retail performers in the week following Black Friday. Additionally, the shares have pulled back from their October post-earnings peak, and bounced at their 40-day moving average and year-to-date breakeven mark, near $114. Netflix, Inc.'s short-term options look to be a particularly good bargain at the moment, with the stock's SVI of 28% in the low 6th percentile of its annual range, and its 30-day ATM IV of 28.9% lower than 94% of all readings in the last 12 months.

News the company is nearing a tax settlement with the Indonesian government has shares of GOOGL trading 1.3% lower at $774.71. However, the shares could find support in the $774-$778 region, which roughly corresponds to the stock's year-to-date breakeven level, as well as a 38.2% Fibonacci retracement of the stock's June low and October high. From a pricing standpoint, it could hardly be a better time to strike on Alphabet Inc's near-term options -- the stock's SVI is currently parked at an annual low of 18%.

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