Most Active Options: Facebook Inc and Twitter Inc

Option traders are taking sides on social media giants Facebook Inc (FB) and Twitter Inc (TWTR)

by Kirra Fedyszyn

Published on Mar 14, 2016 at 12:12 PM

The 20 stocks listed in the table below have attracted the highest options volume during the past 10 trading days. Stocks highlighted are new to the list since the last time the study was run, and data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White. Two notable names are social media titans Facebook Inc (NASDAQ:FB) and Twitter Inc (NYSE:TWTR).

160314MAO

FB is trading 0.5% higher at $109.98, despite news that a Turkish court banned access to both Facebook and Twitter, among other social media sites, after images were posted showing the Sunday car bombing in Ankara that killed at least 32 people and wounded a further 75. Meanwhile, traders are digesting reports that Facebook could encrypt WhatsApp voice calls in a matter of weeks -- perhaps in response to Apple Inc.'s (NASDAQ:AAPL) privacy battle with the FBI -- as well as a less-than-encouraging Barron's cover story (subscription required).

On the charts, FB pulled back from an earnings-induced all-time high in early February, but bounced off support at its ascending 160-day moving average. The shares are now trying to muscle past the $110 region -- home to peak call open interest in the March series of options, which expires at Friday's close.

However, bearish sentiment among speculators has been at an extreme. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), FB's 10-day put/call volume ratio of 0.77 sits at the top of its annual range. In other words, option buyers have picked up FB puts over calls at a much faster-than-usual clip during the past two weeks.

Echoing this is the security's Schaeffer's put/call open interest ratio (SOIR) of 0.75, which is higher than 99% of all readings from the past year. This indicates near-term traders are more put-biased than usual.

Over the last two weeks, the March 105 put garnered the most attention among front-month contracts, though the deep out-of-the-money March 90 strike remains home to peak put open interest in the series, with close to 26,000 contracts outstanding. Still, total open interest on FB options is relatively low, in the 8th percentile of its annual range.

Now may be a prime time to pick up FB's near-term options, however, as premium is attractively priced. Facebook Inc (NASDAQ:FB) has a Schaeffer's Volatility Index (SVI) of 25% -- lower than 80% of the past year's readings, indicating the options market is pricing in relatively low volatility expectations at the moment.

TWTR is up 2% at $17.15 today. TWTR has been stair-stepping lower since mid-2015, with rebound attempts stopping short of the equity's 10- and 20-week moving averages. 

Option traders appear ready for a big bounce, however. At the ISE, CBOE, and PHLX, the stock's 10-day call/put volume ratio has reached an annual high, at 5.31 -- indicating more than five TWTR calls have been bought to open for each put during the past two weeks. In fact, nine of the 10 most active options during this period were calls, with many traders targeting the out-of-the-money 20 strike.

But like FB, Twitter Inc's (NYSE:TWTR) short-term options are attractively priced. The stock's SVI of 57% is in just the 21st percentile of its annual range, meaning premium can be picked up at a relative discount.

Sign up now for Schaeffer's Market Recap to get all the day's big stock movers, must-know technical  levels, and top economic stories straight to your inbox.


A Schaeffer's exclusive!

The Expert's Guide

Access your FREE trading earning announcements before it's too late!


  
 

Partnercenter


NEW! Explore Schaeffer’s Partners' deals and get connected to top online brokerages with deals tailored exclusively for our readers.  Get answers to your questions regarding transfer fees, commission rates, programs and available discounts related to online trading services.

MORE | MARKETstories


Research Exposes Shortcut to Stock Market Wins
A simple way to stop picking losers, and start cashing in like Wall Street's elite.
Cannabis Stock Rally Cut Short after Downgrade
Aurora Cannabis did receive a price-target hike from Jefferies, though
Vaccines, China Trigger Roller Coaster Week for Stocks
Moderna's vaccine captured the attention of Wall Street
Research Exposes Shortcut to Stock Market Wins
A simple way to stop picking losers, and start cashing in like Wall Street's elite.