Facebook Options Bears Pay Up as Technical Woes Continue

FB stock hit its lowest point since January 2017 earlier

Nov 19, 2018 at 2:38 PM
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The shares of Facebook, Inc. (NASDAQ:FB) are down 5.8% today to trade at $131.40, fresh off a 22-month low of $131.27. In addition to a broader FAANG stock sell-off, the social media name could be reacting to another PR disaster, with the Wall Street Journal the latest media outlet to weigh in on CEO Mark Zuckerberg's leadership tactics (subscription required).

However, this negative price action mirrors FB stock's longer-term trajectory, with the shares down almost 31% from their late-July record high of $218.62. What's more, the equity is on track for its third straight monthly decline -- down 13% so far in November -- which would mark the longest losing streak of its kind on record.

fb stock daily chart nov 19

Against this backdrop, skepticism has been ramping up on the FAANG stock. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), FB's 10-day put/call volume ratio of 0.65 ranks in the 75th annual percentile, meaning puts have been bought to open relative to calls at a quicker-than-usual clip.

Today, around 204,000 calls and 151,000 puts are on the tape -- 1.5 times what's typically seen at this point. Most active is the weekly 11/23 140-strike call, where it looks like new positions are being sold to open. If this is the case, the call writers expect FB to close the week south of $140. Elsewhere, speculators may be purchasing new positions at the weekly 11/23 135-strike put, targeting bigger losses through Friday's 1 p.m. ET close.

Meanwhile, short-term options are pricing in elevated volatility expectations at the moment, per FB's 30-day at-the-money implied volatility (IV) of 40.1% -- in the 90th annual percentile. Plus, the stock's 30-day IV skew of 20% registers in the 98th percentile of its annual range, meaning puts have priced in higher volatility premiums relative to calls just 2% of the time within in the past year.


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