Bullish Options Prices Implode as Facebook Stock Tests Key Fib Level

FB options volume just topped 1 million in intraday trading

Mar 26, 2018 at 2:18 PM
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The headlines surrounding Facebook, Inc. (NASDAQ:FB) have been nearly endless over the past week, and today's activity is no different. Following a weekend apology campaign that included full-page newspaper ads, the Federal Trade Commission (FTC) said it's investigating the company's privacy procedures and Germany's justice minister called for stricter regulation. As FB stock tests a key technical level, one analyst is saying buy the dip, and options volume is exploding.

News of the FTC probe initially sent the security to its intraday lows near $149.02, with FB last seen trading down 2.6% at $155.25. And while the stock is now in bear-market territory, it is back above the key $154 level. This region coincides with a 50% Fibonacci retracement of the equity's November 2016 lows near $113.50 -- hit just after the U.S. presidential election -- and its Feb. 1 record high of $195.32.

fb stock weekly chart march 26

This busy backdrop has options trading running hot, with 1.06 million contracts on the tape so far. This is roughly four times the expected intraday pace, and not far from the annual high of 1.3 million options traded in a single session, notched last Tuesday, March 20.

Elevated volatility expectations are being priced into short-term contracts, too, per FB's 30-day at-the-money implied volatility of 39.8% -- a 52-week peak. And amid Facebook stock's recent collapse, call options are remarkably cheap relative to their put counterparts. Most recently, the equity's 30-day implied volatility skew of 13.8% ranks in the 90th annual percentile.

Most traders are targeting the stock's Thursday settlement, with the weekly 3/29 series accounting for five of Facebook's 10 most active options. Trade-Alert, meanwhile, highlights a possible bullish vertical spread roll down of the May 180 and 190 calls to the May 165 and 175 strikes.


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