U.S. Markets closed

Trade gives Facebook room to run

David Russell (david.russell@optionmonster.com)

Facebook has been rallying since May, and one investor apparently thinks that it will keep running into autumn.

optionMONSTER's Heat Seeker program detected the sale of about 5,000 November 85 calls for $1.64 and the purchase of a similar number of Weekly 74 calls expiring today for $1.09. Volume was below open interest in the shorter-dated contracts, which suggests that an existing short position was rolled from one to the other.

The investor probably owns shares in the social-media company and had previously sold the 74s as part of a covered-call strategy . Because they're now in the money , the trader would have been on the hook to deliver their shares today.

Adjusting the trade raised the eventual exit price by $11 and prolonged its time frame by almost three months. It also generated an additional $0.55 of income. (See our Education section for more on the benefits of using options in conjunction with stocks.)

FB declined 0.32 percent to $74.57 yesterday. Shares are up more than 20 percent in the last three months and have been hovering near record highs following a strong earnings report on July 23.

Total option volume was about average in the name yesterday, with overall calls outnumbering puts by more than 2 to 1.

More From optionMONSTER