FB – Facebook Inc. – Shares in Facebook rallied more than 4.0% on Friday to $40.14, the highest traded price since the company’s IPO in May of 2012. The move in FB shares spurred heavy trading traffic in short-dated upside calls on the stock as some traders look for further upside in the shares in the near term. The most actively traded Aug 30 ’13 expiry options are the at the money calls, with volume in the $40 contracts topping 11,000 lots versus open interest of 5,822 contracts just before midday. Time and sales data suggests most of the volume was purchased during the first half of the trading day for an average premium of $0.60 each. Buyers of the $40 calls stand ready to profit at expiration next week in the event that Facebook’s shares settle above the average breakeven price of $40.60. The Aug 30 ’13 $40.5 strike calls are also changing hands today, with more than 2,000 of those contracts purchased for an average premium of $0.50 apiece. Overall options volume on the stock is approaching 310,000 contracts as of 12:05 p.m. ET, surpassing FB’s average daily options volume of around 265,000 contracts. Trading of Facebook call options is outpacing that of puts, driving the call/put ratio above 2.3 as of the time of this writing.
ARO – Aeropostale, Inc. – Options are active on Aeropostale today with shares in the teen retailer unraveling on the heels of lower than expected second-quarter earnings reported after the close on Thursday. Shares in ARO are currently down 20% at $8.78, the lowest level since 2008, as of 11:45 a.m. in New York trading. Trading in September expiry put options this morning suggests some traders are positioning for further weakness in the price of the underlying in the near term. More than 500 puts traded at the Sep $8.0 strike versus open interest of 52 contracts, with much of the volume purchased for an average premium of $0.17 each. Buyers of the Sep $8.0 puts may profit at expiration next month if shares in Aeropostale decline 11% from the current price of $8.78 to breach the average breakeven point on the downside at $7.83. The Sep $9.0 strike puts also attracted fresh interest, with volume topping 1,100 contracts against open interest of 598 contracts. Most of the $9.0 puts appear to have been purchased at an average premium of $0.47 apiece. Finally, mixed trading in the Sep $9.0 strike calls on ARO suggests some traders buying the contracts are positioning for the stock to rebound somewhat during the next few weeks, while sellers of the options throw in the towel on the prospects for a near-term rally above $9.00 a share. Approximately 1,900 of the Sep $9.0 calls changed hands at an average premium of $0.40 each during the first half of the session against zero open positions.