Facebook Inc (FB) Calls Stay Hot After Tax Credit News

Facebook Inc (FB) options traders continue to bet bullishly

by Josh Selway

Published on Oct 10, 2016 at 2:03 PM
Updated on Jun 24, 2020 at 10:16 AM

As social media rival Twitter Inc's (NYSE:TWTR) M&A-related wounds deepen, Facebook Inc (NASDAQ:FB) is enjoying a 1.1% gain today to trade at $130.41 -- likely thanks to news of a huge tax credit out of the U.K. The company also just announced the launch of a business-oriented service, known as Workplace. As such, FB stock continues to trend higher after starting the year at $104.66, and with the shares currently sitting just below last month's all-time high of $131.98, options traders are once again showing bullish tendencies. 

Just as we saw a week ago, Facebook's weekly call options are popular today. In fact, the three most popular FB options overall are the weekly 10/14 129-, 130-, and 131-strike calls, and it's possible traders are buying to open positions at each strike. If so, these bulls are betting on extended gains from FB through week's end, when the contracts expire. 

Further down the list, it looks like there may be some buy-to-open activity taking place at FB's October 132 call. This would suggest other traders are expecting the stock to rally to new all-time highs before front-month options expire, on Friday, Oct. 21. Delta on these calls comes in at 0.33, meaning the options have a roughly 33% chance of finishing in the money. 

As we've noted recently, Facebook options traders have shown a strong preference for calls over puts for quite some time. For one, the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.50 shows call open interest doubling put open interest among options expiring within the next three months. This ratio also sits below 95% of all others from the past year. Then, at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), call buying has almost doubled put buying over the past two weeks. 

This apparent optimism toward Facebook Inc (NASDAQ:FB) isn't confined to the options pits, either. By the numbers, 29 of 31 analysts recommend buying FB, and none consider it a "sell." And, although short interest increased during the last reporting period, the longer-term trend for this figure is to the downside, with short interest on FB falling by 24.5% in the past six months. 

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