Calls Pop as Facebook Inc (FB) Rolls Out New Services

Facebook Inc (FB) announced the launch of two new features

Oct 3, 2016 at 10:45 AM
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Social media giant Facebook Inc (NASDAQ:FB) is fractionally higher this morning, on news it has launched a "marketplace" feature aimed at making it easier to users to buy and sell goods locally. The company also reported it is rolling out a "Messenger Lite" app for Android users, specifically in emerging markets. The stripped-down version of FB's popular messaging app uses far less data, making it optimal for areas with slower internet speeds and less advanced smartphones. Though the stock isn't making a big move, options traders wasted no time getting in on the action.

Specifically, FB call and put options are both trading at accelerated rates, with calls leading on an absolute basis. The weekly 10/7 series is particularly popular, accounting for six of the 10 most active options so far. Most active within the weekly series is the 130-strike call, where it looks like one trader may have bought to open a block of 1,603 contracts. If so, the speculator is betting FB can break out above the round $130 level by the close this Friday, when the weekly series expires.

Also popular is FB's October 130 call, with a mix of buy- and sell-to-open action spotted. In fact, this contract is home to peak open interest across all the stock's options, and the majority of existing positions have been bought to open, according to data on the major exchanges. This could spell trouble for the bulls, however, as an unwinding of hedges related to these bets could cause the $130 level to serve as resistance as the front-month expiration approaches.

Speaking of bulls, near-term traders are close to a call-heavy extreme toward FB. The stock's Schaeffer's put/call open interest ratio (SOIR) of 0.49 shows calls more than doubling puts among options set to expire in three months of less. Moreover, this ratio ranks just 4 percentage points from a 12-month low.

Sentiment outside of the options pits remains strongly skewed toward the side of the optimists, as well. Less than 1% of FB's available float is currently sold short. And of 30 analysts tracking the stock, only two rate it a "hold," compared to 28 "buy" or better recommendations. Plus, many brokerages have been setting their price targets well into all-time-high territory.

Of course, FB has done plenty to earn these upbeat outlooks, from a technical point of view. The stock has been climbing the charts steadily for more than three years, adding 36.5% over the past 12 months alone, at $128.28. The shares have been enjoying support from their 30-day moving average since early July. And longer term, the 40-week moving average has contained Facebook Inc's (NASDAQ:FB) pullbacks since July 2013. As if that weren't enough excitement for the bulls, the stock sits within striking distance of its record high of $131.98.

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