Facebook Inc (NASDAQ:FB) rose some 5.5% in the course of the last 5 days, showing life symptoms through kicks in the stock price. It’s close to 77$ at the moment, but some people expect the values to diminish throughout this week. CNBC depicted a massive trend of bearish bets on Facebook Inc (NASDAQ:FB) options, which traded only 3 quarters of the average daily volume.
“But, right out of the gate, this morning, when the stock was $76 – $75 a trader bought 6,500 of the October 24th weekly $75 put, paying $.80 for those. Those break even at $74.20, down at about 3.5%, by Friday’s expiration. Which is curious about this trade is that there is no event this week other than just the market trading here,” said Dan Nathan.
Facebook Inc (NASDAQ:FB) will reveal financial data in a week, on October 28, and the implied volatility of future contracts has not reached the levels prior to previous earnings reports. Thus, the above transaction could stand for a cheap form of protection against an unpleasant surprise, suggested Mr. Nathan. At a PE ratio of 83.58 and growth of almost 41% year to date, the tech monster has outperformed most of its peers showing no sign of weakness. However, being heavily long onto a stock practically obligates one to take security measures. The problem is that there were too many similar trades with Facebook Inc (NASDAQ:FB) options, but at a smaller scale.
“This is kind of either near-term bearish bet or maybe protection against the long position, but 28,000 of these options traded today and a lot of them bought,” said Dan Nathan
This does not mean that there should be any reason to panic, but it’s a sign that you cannot be too sure about something. Probably, a truly long term holder wouldn’t have bothered that much to hedge its Facebook Inc (NASDAQ:FB) positions as the company is expected to perform brilliantly, yet we cannot make any certain inference based solely on intuition.
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