Facebook Earnings-What the Option Markets are Signaling

Facebook, Inc.

is set to release it's first ever earnings report as a public Company on Thursday and a mid-day look at option trading shows that 258k contracts have already traded, more than double its 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/investors are quite wary about whether Facebook can show it can profit off it's millions of users and are 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.