FB Calls Red-Hot After Bull Note

FB options are running two times faster than what's typically seen at this point

by Lillian Currens

Published on Dec 18, 2019 at 2:15 PM

The shares of Facebook, Inc. (NASDAQ:FB) are eyeing their highest close in over four months today, following a bull note from Deutsche Bank, which lifted its price target to $270 from $260 -- a 36.1% premium to last night's close. The brokerage firm predicted renewed confidence in the firm's namesake Facebook app, thanks to the revamped news feed algorithm. Meanwhile, Britain's competition regulator said it will not be launching an in-depth probe into Facebook (FB) and Alphabet's (GOOGL) Google. 

Deutsche Bank's bull note is in good company. Right now, 28 members of the brokerage bunch consider FB a "buy" or better, while only three call it a "hold." Plus, the consensus 12-month target price of $238.48 has yet to be touched by the security. 

The stock is now up 2.3% to trade at $202.86, and options traders are taking notice. Options volume is roughly double its intraday average right now, with 263,000 calls and 84,000 puts across the tape so far. The most popular contract is the December 210 call, where positions are being bought to open. This means these traders are expecting FB to slice through the $210 region, which hasn't been toppled since 2018, by the time these contracts expire this Friday, Dec. 20. 

This optimism in the options pits is nothing new, though. In the last 10 weeks, 2.54 calls have been bought to open for every put on the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio sits higher than all other readings from the past year, implying a much heavier-than-usual appetite for these bullish bets. 

Despite their popularity, a premium-buying strategy looks like a way to speculate on FB's next move. In fact, the equity's Schaeffer's Volatility Index (SVI) of 20% sits in the lowest percentile of its annual range. This means the stock's short-term options are pricing in extremely low volatility expectations right now. 

FB Chart Dec 18


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