What's behind put action in Facebook

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A large put trade tops today's option action in Facebook as it continues to rally, though there are a number of possibilities behind the strategy.

FB is up 2.98 percent today, trading at $32.79, continuing to climb steadily off its low $25.52 on June 6. The social network was higher than current levels only on its first two days of trading in May, though it is still well below its $38 IPO price.

More than 153,000 FB options have changed hands so far today, about 50 percent above the daily average of the last month. Most of that action is in the puts, and one spread tops that action.

An institutional trader bought 17,000 December 32 puts for $4.90, above the listed ask price at the time, against open interest of 195 contracts. Seconds later the trader sold 17,000 September 30 puts for $2.45 against open interest of 20,394.

If the action at the September strike was a closing transaction, then the trader is rolling a position out three months. That would provide more time for the trade to work and a higher delta as the stock rises.

This could also be an outright bearish play or, more likely, a hedge against long shares .

If the selling in September was done to open a new position, this is a diagonal spread. That would take a maximum profit with shares around $30 at the September expiration but would face losses with moves too far in either direction. (See our Education section)

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