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Downside in Facebook May Continue to $25: Options Pro

Options in Facebook began trading on Monday, with OptionMonster Jon Najarian and Options Action trader Mike Khouw watching the action closely.

According to Najarian’s proprietary heat seeker software, buying was strongest in the Facebook 31, 29 and 28 puts.

Although put buying can sometimes be protective, Najarian interprets the action as a sign that big investors are looking for Facebook to continue lower.

Khouw agrees and adds that he sees a great deal of selling in the June 25 puts – with investors using the premium collected to finance the bets mentioned above.

Because big investors are willing to sell the 25-strike put, (and potentially have the stock put to them at $25) both pros take think Facebook shouldn't trade much lower than $25. "In other words, they're betting Facebook bottoms between here and $25," Najarian explains.

Trader Steve Grasso confirms the interpretation. “Even at $30, no one is saying to me that the stock looks attractive,” says Grasso from the floor of the NYSE where he works.

“Before I’d put money to work in the stock, I’d wait for momentum to reverse. I’d rather miss 5 to 10 points of upside than get in here.”

Posted by CNBC's Lee Brodie



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Trader disclosure: On May 29, 2012 , the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Jon Najarian is long AAPL CALL SPREADS; Jon Najarian is long BAC CALL SPREADS; Jon Najarian is long GS CALL SPREADS; Jon Najarian is long INTC CALL SPREADS; Jon Najarian is long IBM CALL SPREADS; Jon Najarian is long CIEN CALL SPREADS; Jon Najarian is long LM CALL SPREADS; Jon Najarian is long DDMG; Jon Najarian is long CIGX; Jon Najarian is long CBOE; Jon Najarian is long CME; Steve Grasso is long ASTM; Steve Grasso is long BA; Steve Grasso is long D; Steve Grasso is long FRO; Steve Grasso is long LNG; Steve Grasso is long MHY; Steve Grasso is long MO; Steve Grasso is long PFE; Steve Grasso is long S; Steve Grasso is long XLU; Steve Grasso is long ZAZA; Steve Cortes is long XLE; Steve Cortes is long CLX; Steve Cortes is long AZP; Steve Cortes is short COH; Steve Cortes is short JWN; Steve Cortes is short XHB VS. S&P LONGS; Steve Cortes is short EUR CURRENCY

For Michael Binetti
UBS AG, its affiliates or subsidiaries beneficially owned 1% or more of a class of the following companies' common equity securities as of last month`s end (or the prior month`s end if this report is dated less than 10 days after the most recent month`s end): JCP
The U.S. equity strategist, a member of his team, or one of their household members has a long common stock position in NKE
This company/entity is, or within the past 12 months has been, a client of UBS Securities LLC, and investment banking services are being, or have been, provided.: KOH
This company/entity is, or within the past 12 months has been, a client of UBS Securities LLC, and investment banking services are being, or have been, provided.: RL
This company/entity is, or within the past 12 months has been, a client of UBS Securities LLC, and non-securities services are being, or have been, provided.: KOH
This company/entity is, or within the past 12 months has been, a client of UBS Securities LLC, and non-securities services are being, or have been, provided.: RL
Within the past 12 months, UBS Securities LLC has received compensation from this company/entity: KOH
Within the past 12 months, UBS Securities LLC has received compensation from this company/entity: RL


CNBC.com with wires.

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