Shares of Facebook (FB, $33.71, up $7.20) are surging 27% following a blowout quarter after the close on Wednesday. We mentioned this morning shares had cleared $30 last night and the gains have held as we enter the second half of trading.
The company reported a profit of $0.19 a share on revenue of $1.8 billion. Wall Street had penciled-in $0.14 a shares on revenue of $1.6 billion.
We had factored-in a 5% move for shares of Facebook to $28 on a good report, $25 on an earnings miss. Following Google’s (GOOG, $891.51, down $11.39) terrible quarter from last week, there weren’t many traders long going into Facebook’s earnings and the ones that were short the stock are getting their faces ripped off.
The options pits were super active into yesterday’s close as over 11,000 contracts traded on the August 30 calls (FB130817C00030000, $3.63, up $3.39). These options have zoomed 1,400% and reached a peak of $4.25 earlier in the session after closing at 24 cents yesterday.
The Facebook July 28 calls (weekly) (FB130726C00028000, $5.44, up $5.05) closed at 39 cents yesterday and traded over 13,000 contracts. They are up a whopping 1,300%. We looked at these options as a possible trade but they expire this Friday and it would have been an all-or-nothing deal. However, a $390 bet on 10 contracts would have been worth $5,440 right now.
Facebook dispelled Wall Street worries about mobile ad growth and user retention rates with last night’s numbers and shareholders are being rewarded. We missed a great trade but we are close to bagging an elephant.
As we head to press, the market is off its lows and is trading in the green. The Dow is up 4 points to 15,547 while the S&P is higher by 2 points to 1,688. The Nasdaq is higher by 21 points to 3,601.
We have another Profit Alert today and a New Trade so let’s get on it. Subscribers, check the Members Area for the updates.