Zuckerberg Prepares to Meet Conservatives Amid Facebook Inc (FB) Censorship Scandal

Facebook Inc (FB) is seeing buy- and sell-to-open activity on its May 120 call

May 16, 2016 at 11:01 AM
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Amid recent reports of political censorship on Facebook Inc (NASDAQ:FB), CEO Mark Zuckerberg has invited conservative media figures -- including talk show host Glenn Beck -- to the company's corporate offices for a meeting on Wednesday. In other news, FB has begun selling video ads for other companies, according to The Wall Street Journal (subscription required). Given all of this buzz, it's no surprise to see the social media stock's options pits are running at an accelerated pace.

At last check, FB calls are trading at 1.5 times the usual intraday rate. By far the most active strike is the out-of-the-money May 120 call, and from the looks of it, options traders are both buying and selling to open contracts. For the buyers, the goal is for FB to topple $120 by Friday's close, when the front-month series expires, while the sellers are counting on the round-number level to act as a short-term ceiling.

Right now, it seems the option writers have the upper hand. At last check, FB was down nearly 2% at $117.53 -- though that's still just a chip-shot from last week's record high of $121.08. Year-to-date, the social media stock has advanced over 12%, easily outperforming the broader market.

However, now's not necessarily a good time to be selling premium on short-term FB options. The stock's Schaeffer's Volatility Index (SVI) of 23% ranks in the low 12th percentile of its annual range, suggesting the market is pricing in relatively low volatility expectations for the shares.

Elsewhere on the sentiment front, short sellers have been jumping ship. During the last two reporting periods, short interest dove 13.8%, and now just 1% of the stock's float is sold short. Meanwhile, the brokerage crowd is extremely bullish toward Facebook Inc (NASDAQ:FB), with 31 analysts doling out "buy" or better recommendations, compared to one "hold" rating and not a single "sell."

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