Skip to main content

Market Overview

Facebook Option Traders Make $1M Bets On Multi-Year Rally

Share:
Facebook Option Traders Make $1M Bets On Multi-Year Rally

Facebook, Inc. (NASDAQ: FB) shares traded lower by 2% on Monday and are now down 16.4% year-to-date.

On Monday, the largest of a series of Facebook option trades were more bullish than bearish, suggesting smart money is buying the Facebook dip.

The Trades

On Monday, Benzinga Pro subscribers received six option alerts related to unusually large trades of Facebook options. Here are a handful of the biggest:

  • At 10:13 a.m., a trader bought 1,310 Facebook call options with a $190 strike price expiring in January 2021 at the ask price of $13.151. The trade represented a $1.72 million bullish bet.
  • At 10:50 a.m., a trader bought 1,000 Facebook call options with a $180 strike price expiring on May 15 at the ask price of $4.901. The trade represented a $490,100 bullish bet.
  • At 11:09 a.m., a trader bought 1,636 Facebook call options with a $350 strike price expiring in January 2022 near the ask price at $1.444. The trade represented a $236,238 bullish bet.
  • At 11:12 a.m., a trader bought 8,000 Facebook call options with a $350 strike price expiring in January 2022 above the ask price at $1.401. The trade represented a $1.12 million bullish bet.

Of the six total large Facebook option trades on Monday morning, five were calls were purchased at or near the ask or puts sold at or near the bid, trades typically seen as bullish. The other trade represented calls sold at the bid, a trade typically seen as bearish.

All four of the largest trades of the morning were bullish.

Extreme market volatility has pulled the rug out from under a lot of traders. Attend the virtual Benzinga Options Boot Camp to learn to trade options in a volatile market and start going after solid trades with absolute confidence. Register for FREE at benzingabootcamp.com before space fills up!

Why It's Important

Even traders who stick exclusively to stocks often monitor option market activity closely for unusually large trades. Given the relative complexity of the options market, large options traders are typically considered to be more sophisticated than the average stock trader.

Many of these large options traders are wealthy individuals or institutions who may have unique information or theses related to the underlying stock.

Unfortunately, stock traders often use the options market to hedge against their larger stock positions, and there’s no surefire way to determine if an options trade is a standalone position or a hedge. In this case, given the relatively large size of the largest Facebook trades, it’s possible that at least some of the trades were institutions hedging against large positions in Facebook stock.

Facebook Keeps On Rolling

Despite a seemingly never-ending chain of negative headlines related to platform abuse, mishandling of data, non-competitive practices, content censorship and other issues, Facebook has consistently delivered strong top- and bottom-line growth in recent quarters. It seems the majority of Monday’s large option traders feel Facebook’s bullish momentum will continue for at least another two years.

So far this month, Facebook said it plans to launch a new Messenger desktop app for group video calls and chats. In addition, the company said it plans to hire another 10,000 employees by the end of the year.

The social media giant also announced it will be pitching in to help in the economic stimulus efforts by issuing $40 million in grants to small businesses impacted by COVID-19.

Bullish sentiment among StockTwits messages mentioning Facebook is up from 51.8% on March 18 to 68.1% on Monday.

 

See Also: How To Read And Trade An Options Alert

Benzinga’s Take

The trading action on Monday was particularly encouraging for long-term Facebook investors given the two million-dollar call purchases expire in January 2021 and January 2022, respectively. The largest trade of the morning has a break-even price of $203.15, suggesting 18.4% upside for Facebook over the next nine months.

Do you agree with this take? Email feedback@benzinga.com with your thoughts.

 

Related Articles (FB)

View Comments and Join the Discussion!

Posted-In: Options Top Stories Markets Trading Ideas Best of Benzinga

Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
SPAC
Everything you need to know about the latest SPAC news.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com