Put Buyers Have Been Pouncing on Facebook, Boeing

Boeing scored a big win with American Airlines today

Managing Editor
Apr 9, 2018 at 1:04 PM
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Social media giant Facebook, Inc. (NASDAQ:FB) and airline concern Boeing Co (NYSE:BA) both experienced pullbacks over the past few weeks, which sparked interest from options traders. What's more, FB and BA made Schaeffer's Senior Quantitative Analyst Rocky White's list of 20 stocks that saw the heaviest weekly options volume during the past 10 trading days, which can be seen below. New additions to the list have been highlighted in yellow.

MAO chart April 9

FB Continues Bounce Ahead of Zuckerberg Testimony

Shares of Facebook were up 1.8% at $160.08, at last check, continuing the FAANG stock's recent bounce. The stock touched a nine-month low of $149.02 in late March, as a result of the Cambridge Analytica scandal, but is set for a third straight close atop its 10-day moving average -- something we haven't seen in nearly a month. What's more, FB found a foothold atop its 80-week moving average -- the last time it touched that trendline was August 2015, which marked a major buying opportunity.

Facebook founder and CEO Mark Zuckerberg is set to testify before Congress this week, and today met with lawmakers, conceding the company "didn't do enough" to prevent the data breach. Further, Facebook today will notify users if their personal data was misused by Cambridge. 

In light of the stock's dip, options buyers have been heavily put-skewed during the past two weeks. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows FB with a 10-day put/call volume ratio of 0.72, ranking in the 100th percentile of its annual range. This suggests puts have been purchased relative to calls at a much faster-than-usual clip during the past two weeks, even though the ratio still indicates calls outnumber puts on an absolute basis.

Today, FB's May 120 put is most active, with nearly 15,000 contracts exchanged. Traders buying to open the put expect Facebook stock to nosedive south of $120 by May options expiration.

Digging deeper, FB has a 30-day implied volatility (IV) skew of 14.1%, ranking in the 91st annual percentile. This means volatility expectations priced into call options are actually much lower than normal when compared to puts, suggesting now is an affordable time for wannabe call buyers to jump on the Facebook stock bandwagon.

Boeing Stock Higher on American Airlines Order

Shares of BA are up 1% at $329.54, at last check, after the company received a notable $12 billion supply order from American Airlines. Since touching a record high of $371.60 in late February, Boeing stock has edged lower amid fears of a trade war with China. However, the $320 area seems to have emerged as support once again for the blue chip, having contained pullbacks on several occasions in 2018.

The tariff back-and-forth with China has fueled accelerated BA put buying of late. The equity's 10-day ISE/CBOE/PHLX put/call volume ratio sits at 0.93, in the 65th percentile of its annual range.

Today, however, weekly calls are garnering notable attention. Specifically, Boeing's weekly 4/13 330-, 335-, 340-, and 342.50-strike calls are most popular, and have all seen new positions added. Buyers of the calls expect BA to surge atop the respective strikes by the end of the week.

Lastly, the security has been good to premium buyers in the past year. The stock's Schaeffer's Volatility Scorecard (SVS) comes in at a lofty 90 out of 100. That means BA stock has exceeded options traders' volatility expectations during the past 12 months.

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