Option Traders Flock To Facebook, Twitter Stocks As Congressional Hearing Looms

Option traders are preferring calls for social media stocks FB and TWTR

by Patrick Martin

Published on Oct 30, 2017 at 12:20 PM
Updated on Jun 24, 2020 at 10:16 AM

Options trading has been heavy on the Chicago Board Options Exchange (CBOE), with call volume on Friday reaching its highest point since January 2016. Social media powerhouses Facebook Inc (NASDAQ:FB) and Twitter Inc (NYSE:TWTR) are two companies with notable options volume, and both companies' general counsel will testify before Congress on Wednesday regarding Russian interference with the 2016 election. Here's a closer look at how options traders have been placing their bets on FB and TWTR stocks.

The 20 stocks listed in the table below have attracted the highest total weekly options volume during the past 10 trading days. Stocks highlighted in yellow are new entries to the list. Data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White.

MAO Oct 30

Options Bulls Honing In On Facebook Stock Ahead Of Earnings

Facebook stock is currently up 1% to trade at $179.75 and earlier today touched a record high of $180.69. It's been an solid year for FB, which has tacked on 54.6% year-to-date. The shares have carved out a path of higher highs all year, with pullbacks contained by the 80-day moving average, a historically bullish signal for the social media stock.

Facebook will report earnings after the close on Wednesday. Looking back, Facebook has a fairly good post-earnings history. Over the past eight quarters, the equity has moved higher in the session after the company reports five times, including a 2.9% jump last quarter. On average over the past eight quarters, the shares have moved 5% the day after earnings, and this time around the options market is pricing in a larger-than-usual one-day move of 7.7%, per at-the-money implied volatility data.

Facebook options traders have shown a distinct preference for weekly calls over weekly puts in the past two weeks, with 467,520 of the former and 201,123 of the latter exchanged. Reinforcing this, on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and the NASDAQ OMX PHLX (PHLX), FB sports a 10-day call/put volume ratio of 2.41, which ranks 6 percentage points from a 52-week high.

On a closer look, the November 180 call is home to peak open interest, and it is also the top traded contract today. Buy-to-open activity looks likely here, which would signal expectations for the security to continue its ascent on the charts in the coming weeks.

Options Traders Betting on More Twitter Stock Upside

As the company prepares for its Congressional hearing on Wednesday, Twitter stock currently is down 1.7% to trade at $21.32, despite touching an annual high of $21.78 earlier in the day. The stock, which enjoyed an earnings victory last week, also received a price-target hike today from J.P. Morgan Securities to $20 from $16.

TWTR has added almost 31% year-to-date, and has outperformed the broader S&P 500 Index (SPX) by nearly 28 percentage points during the past three months. However, a short-term breather may be in the works. TWTR sports a 14-Day Relative Strength Index (RSI) of 72, firmly in overbought territory.

Options traders have preferred calls over puts in the past two weeks, with 208,762 weekly calls exchanged to 108,755 weekly puts. However, call buying has slowed from the breakneck pace it was on earlier in the month. According to data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), TWTR has a 10-day call/put volume ratio of 2.77, which only ranks in the 18th percentile of its annual range.

Digging deeper, the November 21.50 call is the most popular contract in today's session, and data suggests buy-to-open action is happening here. These bulls would be hoping for the security to resume its uptrend and take out the $21.50 level before the close on Friday, Nov. 17, when front-month options expire.


A Schaeffer's 39th Anniversary Exclusive!

8 Top Stock Picks for 2020

Access your FREE insider report before it's too late!


  
 
 

Partnercenter