Renewed Data Concerns Halt Facebook Stock Rally

Facebook insists the device-maker partnerships were monitored and subject to user consent

Patrick Martin
Jun 4, 2018 at 9:58 AM
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Data privacy concerns that plagued Facebook Inc (NASDAQ:FB) last spring resurfaced over the weekend, after the New York Times reported the company gave a number of its partnered phone and device makers -- such as Apple (AAPL) and Amazon (AMZN) -- unauthorized access to user data. In response, Facebook has insisted the partnerships were tightly controlled and subject to user consent. At last check, Facebook stock is down 0.7% to trade at $192.57.

Some of today's downside may also be attributed to the equity's overbought status, with FB's 14-day Relative Strength Index (RSI) closing Friday at 72. In fact, Facebook stock was on a four-day winning streak heading into today's trading, and May was its best month since July 2017. Plus, the shares are still just a chip-shot away from their Feb. 1 record high of $195.32, and have relied on support from their 10-day moving average since a late-April bull gap.

Lately though, there's been plenty of skepticism levied toward the FAANG stock. FB's 10-day put/call volume ratio of 0.65 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) ranks in the elevated 81st annual percentile. So, while calls have outnumbered puts on an absolute basis, the elevated ratio indicates puts have been bought to open relative to calls at a quicker-than-usual clip.

Given the security's impressive technical backdrop, some of this put buying could be protective in nature. Whatever the reason, traders looking to speculate on Facebook's near-term price action may want to do so with options. The stock's Schaeffer's Volatility Index (SVI) of 19% ranks in just the 13th annual percentile, suggesting short-term options are cheaper than usual, from a volatility standpoint.


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