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Huge Upside Play in Facebook

By Pete Najarian of OptionMonster
 
NEW YORK -- Facebook (FB) hit a record high Wednesday, and the option activity keeps getting more interesting.
 
OptionMonster's tracking systems detected a massive upside trade in the social-media stock, with 45,986 February 55 calls sold and 45,986 June 65 calls bought. The trader is closing the nearer-dated calls and collecting $3.35 in profit while maintaining the potential to earn more if the shares continue to climb.
 
Long calls lock in the price where a stock can be purchased, letting investors cheaply position for a rally. They can also be rolled from one month to another, as this trader did Wednesday, benefiting from a rally without ever owning the shares and staying positioned to profit from further gains.
 
Facebook shares declined 0.62% to $64.45 on Wednesday but at one point hit an all-time high of $65.06 in the session. The mojo has been strong, with this stock up more than 130% in the last year.
 
Wednesday's monster roll was the biggest transaction anywhere in the option market and really skewed Facebook's volumes, with calls outnumbering puts by almost 200,000 to 58,000.
 
Najarian owns FB calls.

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

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