Facebook Inc (FB) Option Buyers See Higher Highs

Facebook Inc (NASDAQ:FB) has been surrounded by optimism, and it doesn't appear that'll change anytime soon

by Josh Selway

Published on Nov 20, 2015 at 11:44 AM
Updated on Jun 24, 2020 at 10:16 AM

Social media juggernaut Facebook Inc (NASDAQ:FB) is no stranger to success. Following the firm's impressive quarterly results earlier this month, the shares shot to a record high of $110.65, and a pullback earlier this week was contained by their 20-day moving average. 

Looking back, call buying has been extremely popular in FB's options arena. For instance, at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), 2.3 calls have been bought to open for every put during the past two weeks. This preference for calls is also evidenced by the equity's Schaeffer's put/call open interest ratio (SOIR). At 0.67, this reading indicates call open interest heavily outweighs put open interest among options expiring within three months. 
 
During the past two weeks, the December 110 call has seen the second-most options added -- nearly 15,000 -- just under the soon-to-expire at-the-money November 107 call. Most of the calls were bought to open, suggesting traders expect FB to assail new heights north of $110 by the close on Friday, Dec. 18, when December options expire. 

What might make the security more appealing, aside from its technical dominance, is its near-term options are attractively priced, historically speaking. That is, FB's Schaeffer's Volatility Index (SVI) of 28% is lower than three-fourths of all other readings from the past year. 

Another technical indicator signals that bulls are firmly in charge. During the two most recent reporting periods, short interest plummeted by almost 20% on FB. As of now, only 1.5% of the stock's float is sold short. 

This isn't surprising, though; basically everyone's bullish on FB. Thirty-one analysts cover the shares, and all but one say it's a "buy" or better. Furthermore, Facebook Inc's (NASDAQ:FB) average 12-month price target stands at $123.69. This level represents uncharted territory, and a 15.5% premium to the stock's current perch at $107.59. 



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