Facebook Inc (FB) Options Traders Brush Off BTIG

BTIG said the bar is set "simply too high" on Facebook Inc (NASDAQ:FB)

by Karee Venema

Published on Jul 22, 2016 at 11:51 AM

BTIG downgraded Facebook Inc (NASDAQ:FB) to "neutral" from "buy," explaining lofty expectations have set the bar "simply too high." Additionally, the brokerage firm said the "risk/reward is no longer compelling," and "near-to-intermediate term shortfalls vs. expectations could be painful." FB stock is brushing off this negative outlook, though, and was last seen 0.3% higher at $120.92. Options traders, meanwhile, are blitzing the stock, with volume running at 1.3 times what's typically seen at this point in the day.

By the numbers, around 82,000 call options have changed hands on FB thus far, compared to 43,000 put options. Eleventh-hour speculators are initiating new positions at the weekly 7/22 120-strike call, where data from the International Securities Exchange (ISE) points to a mix of buy- and sell-to-open activity. Call buyers expect FB to extend its run north of the strike through expiration at tonight's close, while call writers are hoping the weekly options expire out of the money.

Widening the sentiment scope reveals call buyers have been active in the weeks leading up to next Wednesday night's quarterly earnings event. At the ISE, Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), FB's 10-day call/put volume ratio is docked at 1.99 -- it loftiest perch since mid-April. Plus, this ratio ranks in the 79th annual percentile.

This optimism among options traders isn't too surprising, given FB's technical track record. Year-to-date, the stock is up 15.5%, and hit a record high of $122.20 on Wednesday. Plus, Facebook Inc (NASDAQ:FB) has turned in a stellar performance in the session subsequent to reporting earnings over the last three quarters, averaging a single-session gain of 9.1%. Another positive earnings reaction could draw more option bulls to the table, possibly creating a bigger boon for FB stock.

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