Facebook (FB): Probability of Landing above $100 by January 2016

It took just 10 minutes for Facebook (FB) options to trade 170,000 contracts as its share price leapt to a post-earnings record high at $78.44. That means the shares would now need to rise by 27% to reach triple-digits, which is far more doable than the 82% leap of faith that was required at the end of 2013 (FB shars were at $54.80 on 12/31/13). And so we thought it would be interesting to crunch the odds of reaching $100 per share using available option expirations. According to current option pricing, investors see a 1.5% chance of jumping that far by September 19. The odds of doing so one month later are just 3.6%, while by December 19 they jump to 9.2%. Option traders currently assign a 10.3% chance of closing above $100 in time for options settlement January 16, 2015, six months from now. However, the odds improve substantially to 21.7% – or roughly one-in-five – by January 2016.

Chart – Probability of landing above $100 by January 2016

(click to enlarge)

About Andrew Wilkinson 1023 Articles

Affiliation: Interactive Brokers

Andrew Wilkinson is the senior market analyst at Interactive Brokers Group, where he provides daily commentary and analysis on U.S. equity options trading throughout the trading day. Andrew provides webinars designed to explain option-related trading scenarios covering futures, fixed income, forex and equities.

Interactive Brokers: Interactive Brokers offers direct market access to around 80 electronic global markets from a single account. Successful traders and investors understand that superior technology and lower trading costs can result in greater returns. For 32 years we have been building direct access trading technology that delivers real advantages to professionals worldwide. With consolidated equity capital of US $4.4 billion, IB and its affiliates exceed 1,000,000 trades per day. In addition, our prudent and conservative risk policies make Interactive Brokers a safe haven for your money. Discover some of the reasons why IB, the largest independent US broker/dealer, is the professional traders' and investors' choice.

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