Facebook is down to its lowest price since November, and buyers
are taking a shot on the long side.
optionMONSTER's Heat Seeker monitoring program detected the
purchase of some 6,000 July 24 calls, most of which priced for
$1.60. About 4,000 of them were matched against the sale of July 27
calls or $0.43.
Owning calls lock in the price where investors can buy the
social-media stock, while selling them creates a commitment to sell
shares if they climb to a certain level. Combining the two controls
the difference between the two prices and is known as a
. (See our
In the case of today's activity, the investor controls the $3
spread for $1.17. That will translate into profit of 156 percent if
the stock closes at or above $27 on expiration. Traders are also
buying the July 30 calls for $0.10, but volume is below open
interest in those.
FB is down 2.43 percent to $24.45 in afternoon trading and has lost
12 percent of its value since the start of May. It had initially
rallied after quarterly revenue beat estimates, but then quickly
Overall option volume is double its daily average so far today,
with calls outnumbering puts by nearly 3 to 1.
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