Facebook Inc (FB) Option Bull Banks On a Late-Year Rebound

Call buying has picked up on Facebook Inc (FB), despite a rough post-election performance

Dec 2, 2016 at 2:24 PM
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Things haven't been pretty for Facebook Inc (NASDAQ:FB) lately, as "FANG" stocks have buckled in the wake of the U.S. election results. Since its election day close at $124.22, the social media stock has dropped more than 7% to trade at $115.20. But that hasn't stopped options traders from placing bullish wagers.

Specifically, during the last two weeks at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have bought to open 2.26 FB calls for every put. The corresponding call/put volume ratio rests just 2 percentage points from an annual peak -- hinting at a growing appetite for bullish bets over bearish.

That trend is bearing out today. At last check, 171,000 call options were on the tape versus fewer than 102,000 puts. According to Trade-Alert, one speculator plunked down about $1.7 million for a massive bull call spread at FB's December 115 and 121 calls. In other words, the trader anticipates the social media stock will rally to $121 by the close on Friday, Dec. 16, when front-month options expire.

This option player isn't the only one with a glass-half-full perspective on Facebook. In fact, 28 of 31 analysts rate the stock a "buy" or better, with not a single "sell" opinion to be found. Not to mention, the consensus 12-month price target of $155.80 stands in record-high territory.

However, as previously explained, Facebook Inc's (NASDAQ:FB) technicals haven't necessarily warranted such optimism. In fact, the stock is threatening to settle south of its 50-week moving average for the first time since mid-2013. Should the trendline be breached and the downward momentum persist, a capitulation among option bulls and/or a round of negative analyst attention could exacerbate headwinds.

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