On Feb. 19, when Facebook (FB) announced its purchase of WhatsApp for $19 billion, many scratched their heads regarding the transaction price (can you say overpay?) but one group that appears to have overlooked this is options traders.?
According to a Bloomberg story, since Feb. 20, traders have purchased and sold?554,000 bullish Facebook calls on a daily basis. This is up from its 2014 average of 247,000. On Feb. 20 and Feb.21, the total hit 1.3 million–greater than any other time over the last four months. Bloomberg noted that over half were out of the money options, suggesting the company’s shares will keep climbing.
Since 2012, they have quadrupled.?
In addition, bullish options volume has been 2 to 1 as compared to bearish since the deal’s announcement (after the bell) on Feb. 19.?
Stephen Solaka, manager partner at Belmont Capital who oversees Facebook options, said to Bloomberg on Monday that traders have “shrugged off the size of the deal and the stock is acting like it?s a good thing. People who are on the short side could be buying call protection or they could just think the deal is undervalued and it?s a huge thing for the company.?
As for Facebook CEO Mark Zuckerberg, he has shot down the belief that his company had overpaid and said on Monday that?WhatsApp was ?worth more than $19 billion? as he expects WhatsApp’s current 450 million members to grow approximately 1 million daily and that his goal is to have subscribers hit 1 billion.
On Tuesday,?306,566 Facebook options contracts traded with 55.9% calls and 44.1% puts.The underlying closed at $69.85, down 0.93 (1.31%).