Facebook options spotlight

July 24, 2014 05:53 AM

It took just 10 minutes for Facebook options to trade 170,000 contracts as its share price leapt to a post-earnings record high at $78.44.

That means the shares would now need to rise by 27% to reach triple-digits, which is far more doable than the 82% leap of faith that was required at the end of 2013 (FB shars were at $54.80 on 12/31/13).

So we thought it would be interesting to crunch the odds of reaching $100 per share using available option expirations. According to current option pricing, investors see a 1.5% chance of jumping that far by Sept. 19. The odds of doing so one month later are just 3.6%, while by December 19 they jump to 9.2%.

Option traders currently assign a 10.3% chance of closing above $100 in time for options settlement January 16, 2015, six months from now.

However, the odds improve substantially to 21.7%--or roughly one-in-five--by January 2016. 


Chart: Probability of landing above $100 by January 2016.

About the Author

Andrew is a seasoned trader and commentator of global financial markets. He worked for several London-based banks trading cash and derivatives before moving to the U.S. to attend graduate school. Andrew re-joins Interactive Brokers following a two-year stretch at a major Wall Street broker-dealer as their Chief Economic Strategist. His coverage of stocks, options, futures, forex and bonds regularly surfaces in global media, and over the last several years Andrew has made many TV appearances on Bloomberg, BBC, CNBC and BNN and Yahoo Finance.