Facebook FTC Buzz Sparks Unusual Options Volume

FB is back below its $500 billion market cap

by Karee Venema

Published on Jun 3, 2019 at 2:55 PM
Updated on Jun 3, 2019 at 3:09 PM

Alphabet (GOOGL) sent the broader tech sector reeling out of the gate on news the Department of Justice (DoJ) is considering an antitrust probe into the search engine giant. Losses have only accelerated for fellow FAANG stock Facebook, Inc. (NASDAQ:FB), after a Wall Street Journal report indicated the Federal Trade Commission (FTC) secured the right to lead antitrust investigations into the social media firm as part of a broader deal that allows the DoJ to head the Google inquiry.

At last check, FB stock was down 7.2% at $164.75 -- set for its worst day since Dec. 19 -- and options traders are in overdrive. With about 90 minutes left in today's trading, around 372,000 calls and 220,000 puts have been exchanged, four times what's typically seen at this point in the session. Plus, Facebook's 30-day implied volatility has spiked 20.5% to 35.5%, which registers in the 98th annual percentile.

The weekly 6/7 175-strike call is most active, and Trade-Alert suggests some buy-to-open activity is occurring here. The volume-weighted average price on these calls was most recently seen at $0.94, which would make breakeven for the call buyers at the close this Friday, June 7 -- when the weekly options series expires -- $175.94 (strike plus premium paid).

Today's call-skewed session is nothing new for Facebook options traders, though. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day call/put volume ratio of 2.08 ranks in the 76th percentile of its 52-week range, meaning calls have been bought to open over puts at an accelerated clip.

The optimism is seen outside of the options pits, too. While 31 of 36 analysts maintain a "buy" or better rating, the average 12-month price target of $222.35 is a 35% premium to current trading levels. This leaves the door open for a round of bear notes to come through, should FB stock continue its recent slide.

In fact, Facebook stock is now down 17% from its late-April peak above $198, trading below the $500 billion market cap level. But while the shares are on track to close below their 120-day moving average for the first time since before a late-January bull gap, they have found a foothold atop their 200-day trendline.

fb stock daily price chart on june 3


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