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Facebook options trades will hedge more downside-CBOE trader

Friday, May 25, 2012 - 02:59

May 25 - Andrew Keene, independent trader at the Chicago Board Options Exchange, says that after Facebook's early sell-off, options traders will likely bet there is more downside to the stock.

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The next chapter and of baseball drama starts Tuesday when investors get a chance to trade FaceBook options but that. Chicago board options exchange. Options trader Andrew Keen. I think there would a lot of volatility and Facebook's stock during its first week at treating our news options that heads. That of course that the whole point of using options as different couple different ways to use opt and one of the staff had to get the long position. I am not currently long FaceBook stock but about as long Facebook's not I would be a little bit scared it's sold off from the 38 dollar IPO price. So I'd be looking Nino made by some downside but -- or -- some upside calls against my position to had to get my position. Just do you expect any options who's going to be in the market. It's going to be very very interesting on Tuesday when they come out in the morning markets will be very very wide you know that's going to be an implied volatility somewhere between 65 and 85%. As you look at that implied volatility -- think dot. Think Danny Groupon. Because by getting Hamas 75% for implied volatility and that I think it's actually gonna push the stock lower it that it a lot of big banks in real -- customers want to protect their position and that whether it protect the group that has backed out of the money but and selling out of the money calls that the traders that take the other side of that position -- -- -- against that. Bush in the stock lower. Also raising the heart you are right. Currently the hearts of our rate is around 29%. Which means if I want it to short FaceBook it cost me 29%. Every single data short it. So on a thirty month period from now until tax expiration it cost me about eighty cents he short Facebook's. And we heard all week it was hard it -- FaceBook stock but I guess that will change next week. Well it should be interesting because Lincoln was actually a little higher -- it was around 50%. Right now FaceBook is at 29%. But I think as more customers coming in -- I what's -- calls. Like I said the traders have to sell stock as Morse back and getting stalled the heart to bar rate should go higher that a lower. They think a lot of the institution to be in their trading is that make it too expensive for the retail investor to hedge their -- Well that thing got to take consideration at this part of our -- so this part of our make rate changes the price of the options for the price of what's. Increases because it is a negative rate it's hard to barge to -- that Kate be sort stock. And he calls go down and priced so because most of the banks are long it's not as well they're gonna probably look at to put on similar positions. Buying out of the money putts and selling out of the money calls and what volume do you think what they on dateline. It's interesting because the volume in the stock is Iran a 193 million shares all -- you know I look at this six times what apple trades. The only thing that I think the -- not going to be high. If they're not gonna have weekly options just yet so you wanna trade basically get the trade June July August -- not going to be electric that we would just yet. Citadel is the main market maker pretty soon they'll have weakness but not just yet. Entertain joining us from the Chicago board options exchange thanks so much thank you Rhonda I'm Rhonda schaffler this is writers.

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Facebook options trades will hedge more downside-CBOE trader

Friday, May 25, 2012 - 02:59