Facebook is scheduled to release its next earnings report tonight after closing bell, and activity in the options markets suggests investors are betting the social network’s stock will rise after that report. Data indicates bullish bets on call options that expire on Friday.
Traders snapping up Facebook (FB) calls
It’s not uncommon for investors to make bets on various stocks and where they will be going after a company’s earnings report. Saumya Vaishampayan of The Wall Street Journal reports that data from Trade Alert indicates that call options on Facebook Inc (NASDAQ:FB) that have a strike price higher than the social network’s current share price were the most-traded on Tuesday.
Here’s a round up of hedge funds’ May returns
Tyro Absolute Return Fund was down 1.5% for May. The fund's main contributors in May were Super Micro Computer, which gained 1.6%, Shyft Group, which was up 1%, and GCI Liberty, which gained 1%. Detractors in May include Recro Pharma, which fell 2.6%, index shorts and hedges, which declined 2%, and DXC Technology, which was Read More
The most popular call contract was the one to purchase Facebook Inc (NASDAQ:FB) shares for $87 apiece by Friday.
Facebook’s (FB) straddle pricing
Facebook Inc (NASDAQ:FB) stock has the potential to move by about 6% in either direction through the end of the week. That’s what some options traders are betting on through the straddle options strategy. This strategy involves purchasing both call and put options at the same strike price close to the stock’s current share price. The point of the strategy is to place a bet on how big of a move a stock will make instead of the direction in which it will go. As the price of the straddle purchase increases, so the size of the expected move increases.
If Facebook Inc (NASDAQ:FB) stock does move by almost 6% following the company’s earnings report tonight, then that would be the largest move since October. At that time, the stock declined 6.1%. Then in January, the social network’s shares increased 2.3% after its December quarter earnings report. The biggest recorded move after earnings in the last year was 3.6%.
Will Facebook (FB) buck the growth trend?
So far this month, shares of Facebook have increased by approximately 2.3%. Since the beginning of the year, they are up by nearly 8%. Michael Purves, an analyst with Weeden & Co., told The Wall Street Journal that investors are looking for companies that will keep growing even though the economic environment is one of slowing growth. He noted that a number of economic reports suggest the U.S. economy started this year off slowly.
The analyst further said many investors love Facebook Inc (NASDAQ:FB) because its fundamentals are independent of what’s happening in the broader economic environment.
As of this writing, shares of Facebook Inc (NASDAQ:FB) were up 0.54% to $84.07 per share.