Big tech is feeling the heat this week, but one trader just bet $7 million that Facebook could be gearing up for a big rebound.
Shares of the social media giant were down more than 3 percent on Thursday afternoon, continuing its slide following COO Sheryl Sandberg's testimony on Capitol Hill Wednesday. According to Dan Nathan of RiskReversal.com the sell-off sparked a surge of options activity in the stock.
On Wednesday, Facebook saw 1.5 times its average daily trading volume. Within the activity, Nathan highlighted a buyer of 20,000 January 2020 270-strike calls for $3.50 per contract. Since each call option accounts for 100 shares of stock, this is a bullish bet that shares of Facebook will hit $273.50, or up more than 60 percent from its current levels, by January of 2020.
"I suspect this is a very long holder, levering up a position," Nathan said Wednesday on CNBC's "Fast Money. " "He or she thinks this stock is way, way overdone and sees much higher highs out into 2020."
Back in July, Facebook posted its worst decline in history after a buildup of privacy and regulatory issues surrounding the social media platform triggered a 19 percent sell-off following its earnings release.
Although Nathan believes the trade "is not a great way to make a bullish bet," he thinks it may be an attempt to take advantage of cheaper options prices should the stock reach its prior highs by the January expiration.
"When the stock was at the all-time highs back in July … those January 2020 270-strike calls were trading at 15 bucks," he said. "I suspect this sort of leverage that a long holder is looking to get on [is] a big move back to new highs over the next year and a half or so."
Shares of Facebook are down more than 8 percent year to date and were trading lower on Thursday afternoon, around $161.77.