Facebook Earnings: What the Option Markets are Signaling
Facebook (Nasdaq: FB) is set to release its first ever earnings report as a public company on Thursday. A mid-day look at option trading shows that 258k contracts have already traded, more than double the average daily contract average.
Not surprisingly, the weekly July 27th expiration $25 puts lead the way with more than 14,000 contracts trading and over 70% of the activity either mid-market or on the offers. This would suggest that traders may be wary that Facebook will be able to show that it can profit off its millions of users. Some may be hedging long equity positions or looking for a continued slide in share price.
The put/call ratio currently sits at 1.27, again showing that these defensive contracts are the focus ahead of this afternoon's release. A look at the near term August 3rd expiration weekly at-the-money straddle shows that option players are pricing in at least a 13% move in the stock following the earnings announcement.
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