Facebook Inc (FB) Call Buyer Bets $1.5 Million On New Highs

Oppenheimer named Facebook Inc (NASDAQ:FB) its top 2017 internet pick, reiterating its "ouperform" rating and $144 price target

Jan 9, 2017 at 2:36 PM
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Facebook Inc (NASDAQ:FB) stock has seen some of the heaviest options volume in recent weeks, according to Schaeffer's Senior Quantitative Analyst Rocky White. Specifically, over the last 10 trading days, 754,354 calls and 474,525 puts have changed hands on FB. Today, with FB up 1.3% to trade at $124.95 -- after Oppenheimer named the stock its top 2017 internet pick, and reiterated its "outperform" rating and $144 price target -- options volume is accelerated once again, trading at 1.7 times the average intraday rate.

By the numbers, 179,172 calls have traded on FB so far, compared to 79,786 puts. Most active are the at-the-money weekly 1/13 and January 2017 125-strike calls, where there appears to be a mix of buying and selling occurring, with new positions being initiated at the weekly strike.

More noteworthy, perhaps, is the action happening at FB's March 135 and 150 calls, where Trade-Alert suggests a long call spread was created for an initial cash outlay of $1.5 million [($1.71 paid for long 135 call - $0.21 collected for short 150 call) * 10,000 contract spread * 100 shares per contract]. If this is the case, the spread strategist is eyeing a move to $150 -- uncharted territory -- by March options expiration, but will profit if FB tops $136.50 (bought call strike plus net debit of $1.50). However, by initiating the spread, she sacrificed the unlimited profit potential of a straight call purchase in order to lower her cost of entry -- and breakeven point.

This bullish bias is seen outside of the options arena, too. Short interest, for instance, fell 3.6% in the most recent reporting period, and now accounts for just 1.1% of the stock's available float. It would take one session to cover these bearish bets, at FB's average daily pace of trading -- not much in the way of sideline cash. Elsewhere, all but three of 32 covering analysts maintain a "buy" or better rating on FB, with not a single "sell" to be found.

Technically, FB is up 28.5% year-over-year. More recently, the shares pulled back after hitting a record peak of $133.50 on Oct. 25, but found a foothold in the $116-$117 region -- which roughly coincides with a 38.2% retracement of their January-to-October rally. And while the shares of Facebook Inc (NASDAQ:FB) bounced from here, they are currently struggling in the $125 region, home to their early August highs, and more than 46,000 contracts outstanding at the January 2017 125-strike call.

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