$FB keeps paying off for bulls

Option traders quadruped their money in Facebook today.

On two consecutive sessions in the week after Thanksgiving last year, Investitute’s market scanners identified the following call purchases rolled from January positions:

–On Nov. 29, 7,500 February $155 calls were bought for $3.34 above open interest of 1,621 contracts with shares at $138.21.
–On Nov. 30, 7,500 February $155 calls were bought for $3.33 below open interest of 10,365 contracts but adding to the previous session’s volume with shares at $138.29.

Those calls traded for as much as $13.95 this morning, more than 4 times their purchase prices. The stock rose about 22% in the same time period, underscoring how options can far outperform their underlying shares.

It was the third winning trade in Facebook posted in the last week, starting with a big overnight move in activity cited by Investitute co-founder Pete Najarian on Jan. 30 on CNBC’s “Halftime Report” just hours before the company’s earnings report.

Long calls lock in the price where investors can buy a stock, letting them position for a rally at limited cost with the potential for significant leverage. They carry less risk than owning shares because the most that can be lost is the price of the options no matter how far the stock might fall.

FB reached a session high of $169.24 this morning before pulling back with the broader market to close at $166.38, down 2.41% on the day. The social network topped quarterly estimates and reported strong usage growth after the market closed on Jan. 30 despite a raft of negative news in recent months.