Market Overview

Facebook Option Traders Betting On A Holiday Rally

Share:
Facebook Option Traders Betting On A Holiday Rally

Facebook, Inc. (NASDAQ: FB) shares traded higher by 2% on Wednesday and are now up 54% year to date heading into the final month of 2019.

On Wednesday, the largest of a series of Facebook option trades were more bullish than bearish, suggesting smart money is expecting Facebook to finish the year on a high note.

The Trades

On Wednesday, Benzinga Pro subscribers received 18 option alerts related to unusually large trades of Facebook options. Here are a handful of the biggest:

  • From 8:33 a.m. to 8:47 a.m. likely a single trader bought 2,751 Facebook call options with a $207.50 strike price expiring on Dec. 20 near ask prices ranging from $1.553 to $1.701. The series of five trades represented a bullish bet of bet of more than $420,000.
  • From 8:52 a.m. to 9:03 a.m. likely a single trader bought 2,188 Facebook call options with a $207.50 strike price expiring on Dec. 13 above near ask prices ranging from $1.261 to $1.799. The series of four trades represented a bullish bet of bet of more than $280,000.
  • At 10:54 a.m., a trader bought 500 Facebook put options with a $185 strike price expiring in January 2021 near the ask price at $15.676. The trade represented an $783,800 bearish bet.

Of the 18 total large Facebook option trades on Wednesday morning, 15 were calls were purchased at or near the ask or puts sold at or near the bid, trades typically seen as bullish. The three remaining trades were calls sold at the near the bid or puts purchases at or near the ask, trades typically seen as bearish.

Despite the largest trade of the morning being bearish, 83% of the large Facebook option trades on Wednesday were bullish.

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 and the fact there were so many large trades make it 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 2019. It seems the majority of Wednesday’s large option traders feel Facebook’s bullish momentum will continue through the end of 2019.

This week, Facebook continued its aggressive growth strategy by announcing a new acquisition and a product launch. On Monday, Facebook announced Viewpoints, a market research app that rewards users for completing surveys and participating in research.

On Tuesday, Facebook announced a buyout of virtual reality game developer Beat Games.

Benzinga’s Take

The largest option trade of the morning for Facebook was bearish, but it also represented the longest-dated contracts that don’t expire until 2021. Of the 15 contract trades that expire before the end of December, 14 (93.3%) were bullish.

Facebook's stock traded around $202.88 per share at time of publication.

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

Related Links:

Large Option Trader Betting On Biotech Stock Akebia Following Insider Buys

How To Read And Trade An Options Alert

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

 

Related Articles (FB)

View Comments and Join the Discussion!

Mid-Afternoon Market Update: Dow Rises 50 Points; 360 Finance Shares Spike Higher

Today's Pickup: Getting On The Same Page With Accounts Payable; The Great Logistics Moonshot