Option Bulls Predict Fast Start to 2015 for Facebook, Inc. (FB)

Facebook Inc (FB) call buying continues to be popular

by

Published on Dec 31, 2014 at 1:27 PM
Updated on Apr 20, 2015 at 5:32 PM

Facebook Inc (NASDAQ:FB) is bucking the broad-market trend higher this afternoon, down 0.3% at $78.96. Over the past few months, the shares have struggled in the $80 area, and after ending last Friday above this round-number level, they've given back 2.3% week-to-date. Nevertheless, options traders today are rolling the dice on a record high early in the new year.

Taking a quick step back, short-term contracts are in high demand, based on FB's 30-day at-the-money implied volatility, which is up 5.7% to 39.5%. Along those lines, call buyers are initiating fresh positions at the stock's January 2015 85-strike call, where nearly 12,500 contracts are on the tape -- making it the social network's most active option. In other words, these bullish bettors expect FB will topple $85 -- putting it in record-high territory -- by the close on Friday, Jan. 16, when front-month contracts expire.

Today's penchant for call buying is by no means unusual. During the last 10 days at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), FB has racked up a call/put volume ratio of 2.72, indicating nearly three calls have been bought to open for every put. What's more, this ratio ranks higher than four-fifths of comparable readings from the past year.

This extreme optimism potentially leaves Facebook Inc (NASDAQ:FB) vulnerable. If the shares continue to struggle around $80, the weaker bullish hands may decide to hit the exits, which could result in additional headwinds.


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