The most common trade so far has been to sell the June 30 puts for $1.25 to $1.60 as investors bet that Facebook will remain above $30 over the next three weeks, according to OptionMonster’s systems. If they’re right, they’ll keep the premium, and if they’re wrong they will have to buy shares for $30 — regardless of their price at the time.
Facebook shares are down 5.20 percent to $30.25 today, having lost more than one-fifth of their value since going public on May 18. That steady decline has pushed up realized volatility in the stock to more than 100 percent in its short history as a public company.
Based on activity so far, the market is assigning implied volatility of only about 60 percent in the name. This suggests that traders think it will move less aggressively in coming weeks. For those looking to bet against the stock, it also means that puts are reasonably priced.
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David Russell is a reporter and writer for OptionMonster. Russell has no positions in Facebook.