Traders liking Facebook Inc (FB) call options as shares rally

Traders liking Facebook call options as shares rallyFacebook Inc (NASDAQ:FB) – Shares in the largest social networking company are bucking the trend today, trading up 6.7% on the day at $21.68 as of 11:50 a.m. in New York. Trading traffic in weekly options on Facebook Inc (NASDAQ:FB) this morning suggests some traders are positioning for shares in the name to extend gains in the near term. The company yesterday launched a new gift-giving feature that allows users to buy items for friends without exiting the site. Traders anticipating continued gains the share price next week snapped up more than 2,000 calls at the Oct. 05 ’12 $21 strike for an average premium of $0.83 apiece this morning.

Intraday moves in the price of the underlying now finds premium required to purchase the $21 strike call has nearly doubled since then to $1.20 apiece as of 12:40 p.m. ET. Buyers stepped in to get long the Oct. 05 ’12 $21.5 and $22 strike weekly calls, as well. It looks like traders picked up more than 1,800 calls at each strike, paying average premiums of $0.50 and $0.31 apiece, on average, respectively. Fresh interest is also building in far out-of-the-money weekly calls with $22.5 and $23 striking prices. Traders paid an average premium of $0.21 apiece to buy roughly 200 of the $22.5 strike calls and plunked down $0.12 in premium to purchase some 240 of the $23 strike call options. Call buyers may see the value of their contracts increase if Facebook Inc (NASDAQ:FB)’s shares continue to push higher during the next five trading sessions. Intraday price action in Facebook Inc (NASDAQ:FB) shares has already moved the needle in favor of early-bird call buyers who now hold bullish options that have doubled in value in some cases since this morning.

Tempur-Pedic International Inc. (NYSE:TPX) – News that memory-foam mattress maker, Tempur-Pedic International, Inc., agreed to purchase Sealy Corp. sent shares in TPX up sharply on Thursday and spurred some upside call buying in the front month options. We noted yesterday that one trader, who sold put options ahead of the deal between the two mattress companies to partially offset the cost of buying a call spread on the stock, was seeing big paper profits on the bullish position. Fast forward to Friday morning, shares in TPX are giving back some of Thursday’s gains, trading down 4% on the session to stand at $29.41 as of 11:35 a.m. ET. A new three-legged options combo play was initiated on Tempur-Pedic this morning; however, this transaction looks for shares in the mattress company to decline rather than appreciate by year end. The trader responsible for the transaction this morning appears to have sold 500 calls at the Dec. $35 strike, exactly offsetting premium required to buy a 500-lot Dec. $26/$29 bear put spread. The position starts making money if shares dip below $29.00, with maximum potential profits of $3.00 per contract available in the event that shares in TPX drop 11.6% to trade below $26.00 by December expiration. By contrast, the bullish three-legged spread initiated on TPX on Tuesday yields maximum profits if the stock tops $35.00 at November expiration.

Accenture Plc (NYSE:ACN) – Shares in the second-largest technology consulting company are hitting record highs today after the firm forecast higher-than-expected full-year earnings. Shares in the name are currently up 7.6% on the day at $70.36 as of 1:05 p.m. ET. Early-bird call buyers who snapped up bullish options this morning are seeing tremendous paper profits just a few hours later. For example, traders purchased around 390 calls at the Oct. 05 ’12 $65 strike earlier in the session paid an average premium of $3.90 apiece. Now, these deep in-the-money call options cost $5.40 apiece. Profits available to the buyer of 100 of the Oct. 05 ’12 $70 strike call at a premium of $0.15 each on Thursday afternoon are even more impressive, given the price tag on these contracts has increased more than 600% overnight to $0.95 each. Options on Accenture are far more active than usual today, with overall volume topping 16,000 contracts versus average daily options volume of 2,655 contracts by 1:15 p.m. in New York. Most of the trading traffic is in ACN calls, with the call-to-put ratio hovering around 2.5 this afternoon.

Caitlin Duffy
Equity Options Analyst

The material presented in this commentary is provided for informational purposes only and is based upon information that is considered to be reliable. However, neither Interactive Brokers LLC nor its affiliates warrant its completeness, accuracy or adequacy and it should not be relied upon as such. Neither IB nor its affiliates are responsible for any errors or omissions or for results obtained from the use of this information. Past performance is not necessarily indicative of future results.

This material is not intended as an offer or solicitation for the purchase or sale of any security or other financial instrument. Securities or other financial instruments mentioned in this material are not suitable for all investors. Any opinions expressed herein are given in good faith, are subject to change without notice, and are only correct as of the stated date of their issue. The information contained herein does not constitute advice on the tax consequences of making any particular investment decision. This material does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation to you of any particular securities, financial instruments or strategies. Before investing, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

Related tickers: Facebook Inc (NASDAQ:FB), Tempur-Pedic International Inc. (NYSE:TPX), Accenture Plc (NYSE:ACN)

Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The 10 Largest Pharmaceutical Companies In the World

The 10 Most Expensive Android Apps

The 9 Most Expensive Designer Bags in the World

The 7 Most Expensive Real Estate in the World

The 10 Most Expensive eBay Items Ever Sold

The 10 Most Expensive iPhone Apps

The 9 Most Expensive Designer Shoes in the World

The 10 Most Expensive Cigarette Brands

The 10 Most Expensive Law Schools in the US

The 10 Best Wall Street Movies

The 10 Most Expensive Golf Clubs Ever Sold

The 10 Most Expensive Golf Memberships

The 10 Best Disney Characters Ever Created

The 8 Best Foods for Gaining Weight

The 10 Most Expensive Colleges in the World

The 7 Most Memorable Ad Campaigns of All Time

The 7 Most Expensive High Schools in the World

The 10 Electric Vehicles with the Longest Range

The 10 Cities with the Worst Drivers in the World

The 10 Most Expensive Dresses Ever Created

10 Islands to Visit Before You Die

10 Famous Celebrities Who Needed Rehab

The 15 Countries with the Largest Oil Reserves

The 10 Most Overused Excuses in the World

The 5 Best iOS Apps You Can’t Get on Android

5 Companies Damaged By Social Media Blunders

The 10 Most Legendary Blues Songs

The 10 Most Lawless Places in the World

4 Reasons China is a Threat to the US

The 17 Most Sugary Drinks in the World

The 10 Most Ruthless Rulers in History

The 10 Greatest Generals in History

Top 8 Travel Destinations for 2015

The 10 Safest Dog Breeds for Children

The 10 Most Stolen Vehicles in the US

The 7 Most Expensive Celebrity Weddings

The 10 Best LoL Teams in the World

Top 10 Worst Marketing Campaigns Ever Produced

Top 5 Diets that Help You Lose Weight

The 10 Best Ways to Stay Awake

7 Artists That Switched Musical Genres

The 10 Most Expensive Cities to Live in New Jersey

The 10 Best High Schools in New York

The 10 Countries With the Least Gender Inequality

The 6 Biggest Musician-Manager Feuds

The 10 Countries with the Cheapest Gas Prices

The 7 Most Theatrical Bands of All Time

The 8 Worst Band Breakups of All Time

The 10 Most Important South American Leaders

The 7 Most Successful Casting Show Winners

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!