Shares of social media giant Meta Platforms (FB) saw their largest one-day decline last week following earnings. One trader is betting on a sharp rebound in the next few days.
That’s based on the February 18 $240 calls. With 10 days until expiration, 6,768 contracts traded against a prior open interest of 135, for a 50-fold jump in volume on the contract. The buyer of the calls paid $7.98 to make the trade.
Shares traded around $237, making these an at-the-money options trade, capable of moving in-the-money on a small move higher in shares before the end of next week. That also leaves shares nearly one-third off their 52-week high of $384.
Action to take: Retail investors have been piling into shares since the company reported earnings and had its large drop. That’s even though the company’s latest earnings report suggest that the social media platform lost users overall for the first time ever.
Today’s buyers can likely nab a rebound going forward, as shares gapped lower and stocks tend to try and retest gaps lower over time.
For traders, this short-term bet on even a modest move higher is cheap enough to generate mid-to-high double-digit returns. If the overall market suddenly takes off, the returns could be even better.
But as markets are likely to simply trade back and forth on high volatility, traders may want to grab the first move higher on the options before they expire at the end of next week.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.