Facebook shares have been awfully quiet recently, rising just 2 percent from where they opened after reporting impressive earnings in late July. And that seems to have big institutions looking for a way to squeeze more cash out of the social giant.
In a major Monday options trade, one firm sold 6,000 October 2015 82.5-strike calls for $8.85 each. This trade netted the firm a quick $5.3 million in options premium, and they will get to keep all of that money as long as Facebook shares stay below $82.50 through next October. Facebook shares were trading at $77.32 at the time of the transaction.
This trade was likely done against a long position in Facebook shares, according to Dan Nathan of RiskReversal.com. In that case, if Facebook shares are between $69 and $91.35 in October 2015, the options seller will not see any downside losses on the shares (as the position is "protected" by the cash buffer) or miss out on any upside gains due to selling the options.
"It's likely a yield enhancement trade," Nathan said Monday on CNBC's "Fast Money." "That call sale creates a massive buffer."
The only real downside to this popular type of trade (known as an "overwrite") is that substantial upside may be missed. In this case, if Facebook shares do rise above $91.35, the trader will forgo those additional gains on the stock, which of course may prove to be substantial.