Bullish Traders Swarm Caterpillar, Facebook Stock Options

Call selling has been popular on Facebook stock and Caterpillar stock over the past two weeks

May 1, 2017 at 11:22 AM
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The 20 stocks listed in the table below have attracted the highest weekly options volume during the past 10 trading days. Stocks highlighted are new to the list since the last time the study was run, and data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White. Two names of notable interest are social network Facebook Inc (NASDAQ:FB) and Dow stock Caterpillar Inc. (NYSE:CAT). Let's take a closer look at how traders are playing CAT and FB stock options. 

most active options

Options Traders Bet on a Post-Earnings Ceiling for FB Stock

FB stock earlier hit a record high of $152.35, and are currently trading up 1% at $151.84 to bring its year-to-date lead to 32%. With the company set to report earnings after the close on Wednesday, data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) suggests options traders are very bullish. Specifically, FB has a 10-day call/put volume ratio of 2.04 across these exchanges, which ranks in the 90th annual percentile -- hinting at an unusual level of call buying relative to puts in recent weeks. 

However, looking at recently popular weekly options, the picture isn't as clear. For instance, the weekly 5/5 150- and 152.50-strike calls were two of the most popular FB options during the past two weeks, based on open interest levels. But data from the major options exchanges show notable sell-to-open activity at each of these strikes, suggesting a number of traders are betting on Facebook stock ending the week below these levels. 

CAT Stock Crushes Call Sellers

Turning to CAT, the stock is down 0.4% today at $101.82, but still sports a gain of nearly 10% in 2017, thanks to last week's earnings explosion. Like FB, data from the ISE, CBOE, and PHLX shows an unusual interest in long call options. By the numbers, CAT stock has a 10-day call/put volume ratio of 1.04 across these exchanges, which is higher than 98% of readings from the past year. 

But similar to FB, options traders were selling to open CAT calls ahead of earnings. The most popular weekly option during the past 10 days was the now-expired 4/28 100-strike call, and data shows the vast majority of traders were selling to open positions -- in other words, betting on Caterpillar stock holding below $100 through the end of last week. With CAT shares trading no lower than $102 after Tuesday's bull gap, this trade didn't turn out well. Meanwhile, the weekly 5/5 104-strike call has also been popular, with data showing a mix of buying and selling activity here. 
 

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