Option Traders Making Large Bullish Bets On Facebook Following Recent Weakness

Facebook, Inc. FB shares have bounced a bit this week, but remain down 7.5% overall in the past month. Some large option trades on Thursday suggest Facebook remains on the radar for some deep-pocketed traders.

The Trades

On Thursday, Benzinga Pro subscribers received eight option alerts related to unusually large trades of Facebook options. Here are a handful of the biggest:

• At 10:34 a.m., a trader bought 817 Facebook call options with a $190 strike price expiring on Nov. 15 near the ask price at $8.551. The trade represented an $698,616 bullish bet.
• At 10:39 a.m., a trader bought 850 Facebook call options with a $185 strike price expiring on Friday near the ask price at 85 cents. The trade represented an $72,250 bullish near-term bet.
• At 10:40 a.m., a trader sold 500 Facebook put options with a $180 strike price expiring in Jan. 2021 near the bid price at $22.18. The trade represented an $1.11 million bullish bet.
• At 11:16 a.m., a trader bought 1,843 Facebook call options with a $190 strike price expiring on Nov. 15. The trade was split into two orders over about 10 minutes. Both trades were executed near the ask prices at $8.65 and $8.95. The two trades represented a more than $1.59 million bullish bet.

Of the eight total large Facebook option trades on Thursday, five were calls were purchased at or near the ask, or puts sold at or near the bid, trades typically seen as bullish. The remaining three trades were calls sold at the near the bid, trades typically seen as bearish. Each of the five largest trades of the morning were all bullish in nature.

Why It's Important

Even traders who stick exclusively to stocks often monitor option market activity closely for unusually large trades. Given the relative complexity of the options market, large options traders are typically considered to be more sophisticated than the average stock trader.

Many of these large options traders are wealthy individuals or institutions who may have unique information or theses related to the underlying stock.

Unfortunately, stock traders often use the options market to hedge against their larger stock positions, and there’s no surefire way to determine if an options trade is a standalone position or a hedge. In this case, given the relatively large size of a couple of the Facebook trades, they could easily be institutions hedging against large short positions in Facebook stock.

Facebook Headed Higher?

The large option trades in Facebook on Thursday come after Facebook CEO and founder Mark Zuckerberg reportedly sold 50 million shares of Facebook and Paypal Holdings Inc PYPL and early Facebook backer Peter Thiel sold $4 million in Facebook stock last week. News of the large insider sells has some traders concerned that insiders may not have much optimism about Facebook’s immediate future.

The good news for Facebook bulls is that the large options trades on Thursday were decidedly bullish. While there were both bullish and bearish trades, all of the biggest trades were bullish in nature, assuming they did not represent hedges.

Benzinga’s Take

While Facebook continues to face its fair share of antitrust criticism and regulatory risk, its stock and business have continued to impress in 2019. Insider sells aren’t typically as meaningful as insider buys from a trading perspective, and Zuckerberg’s sale represented less than 0.3% of his total holding. Thursday’s option traders may see the recent weakness in Facebook shares and headlines about insider sells as overly pessimistic.

Do you agree with this take? Email feedback@benzinga.com with your thoughts.

Related Links:

Insider Buying Vs. Insider Selling: What Numbers Really Matter For Traders?

How To Read And Trade An Options Alert