Big Trade In FB Calls Ahead Of Holiday Weekend
Trading volumes tend to wane just before the start of holiday weekends, but activity in Facebook options on this Friday before Memorial Day weekend is ticking just above its average daily level, with upwards of 335,000 contracts traded versus an average daily reading of around 327,000 for the stock. Shares in FB are up roughly 1.0% in the final hour of the trading week to stand at $61.15.
A large proportion of the day?s options volume, roughly 20% of the total, is the result of a large call spread initiated in July expiry contracts. One options strategist appears to have purchased 35,000 of the 18Jul?14 67.5 strike calls for a premium of $1.08 each, and sold the same number of 18Jul?14 70.0 strike calls at a premium of $0.64 apiece. Net premium paid to establish the position amounts to $0.44 per contract. The trade makes money if shares in Facebook rally 11% to $67.94, with maximum potential profits of $2.06 per contract available on the spread given a 15% move in the price of the underlying to $70.00 by July expiration. Facebook shares last traded above $70.00 in mid-March.
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