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)

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