Facebook Calls Pop as Stock Eyes Record High

At least two bull notes have rolled in for the equity in the last two days

Assistant Editor
Aug 24, 2020 at 10:08 AM
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The shares of Facebook, Inc. (NASDAQ:FB) are up 2.9% at $274.81 this morning on a headline-laden day. First, the FAANG name saw its price target hiked to $315 from $275 at Citigroup. Jefferies also chimed in, touting the company's new Instagram Reels feature as a possible $2.5 billion revenue catalyst. And on Friday afternoon, it was announced the company's Chief Marketing Officer (CMO) Antonio Lucio will be leaving his position on September 18. Lucio previously worked as the CMO at HP Inc. (HPQ) before joining the social media giant in 2018.

Coming into today, the sentiment surrounding Facebook stock was overwhelmingly bullish, with 29 of the 31 brokerages in coverage calling it a "buy" or better. Plus, the consensus 12-month price target of $281.40 is a 3.9% premium to current levels.

On the charts, Facebook stock is a chip-shot from its Aug. 7 record high of $278.89, now up 34% in 2020. The shares have a solid layer of support in place in the form of their 10-day moving average ever since a July 30 bull gap.  

It should come as no surprise then that the options pits are bullish. This is per Facebook stock's 10-day call/put volume ratio of 3.69 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which sits higher than all other readings from the past year. 

Additionally, today's options pits are being ruled by calls. In fact, in the first hour of trading over 115,000 calls have crossed the tape -- three times the intraday average and volume pacing in the 99th percentile of its annual range. The two most popular contracts today are the weekly 8/28 275- and 280-strike calls, with new positions being opened at both. 

The good news for options traders is Facebook stock's Schaeffer’s Volatility Index (SVI) of 34% sits in the 19th percentile of its annual range. This suggests options have been pricing in relatively low volatility expectations right now -- a boon for premium buyers.

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