Meta Platforms (META) Bulls Attract the Spotlight of Unusual Options Activity

Akin to beating a dead horse, the broader negativity toward Meta Platforms (META) doesn’t require any suspension of disbelief. Honestly, it just calls for a working set of eyeballs. Suffering a steep decline of over 72% of equity value since the beginning of this year, META stock appears to be struggling for breath. What makes the circumstance so jarring for onlookers is that the underlying business represented a clear post-pandemic winner.

Still, every market cycle brings out contrarian investors, whether to the downside or up. As ugly as circumstances are for META stock, it’s also an attractive proposition. True, any 70%-plus loss deserves careful and sober assessment. At the same time, Meta – primarily through its social network Facebook – arguably achieved critical mass. In other words, the brand is too integrated in modern society to ignore.

Nevertheless, bullish contrarians will face one heck of a time wagering on META stock. One of the biggest concerns for the underlying company is the slowdown in the digital advertising space. With Meta CEO Mark Zuckerberg already downgrading expectations amid sharp macroeconomic pressures, the narrative doesn’t provide much room for confidence.

Another factor that stymies the upward progress of META stock is the pivot to the metaverse or the next generation of internet connectivity. Although the idea of integrating our personalities into the digital realm intrigues from a theoretical perspective, in actuality, Meta’s mechanism for this integration is arguably clunky.

Indeed, the Wall Street Journal mentioned that the interactive tools needed for the full metaverse experience are out of touch with reality. If that wasn’t damning enough, some insider reports indicate that the company has trouble getting its own employees excited about the metaverse.

Still, opportunistic speculators remain undeterred as the latest rumblings in the options arena indicates.

META Stock Captures the Show

Following the conclusion of the Oct. 31 session, META stock took pole position in terms of unusual options activity. Specifically, bullish traders targeted the $96 calls with an expiration date of Nov. 4 – this coming Friday. Volume reached 33,718 contracts against an open interest reading of 101. Subsequently, the volume/open interest ratio stood at 333.84, well above the second-most unusual trade, which featured a ratio of 89.96.

In addition, the bid-ask spread for the $96 call option as represented by the midpoint price ($1.41) came out to 4.86%. On Monday, META stock closed at $93.16 in the open market. Therefore, it needs to rise 3.05% for the option to be at the money. In the trailing five days, META dropped nearly 29% of market value so the transaction presents significant risk.

Still, the dominant sentiment in the options arena for Meta Platforms is presently bullish. According to data from Barchart.com, the put/call open interest ratio is 0.41. Typically, the delineation separating optimism and pessimism is 0.70, with figures below this level indicating that more traders are buying calls than puts.

Regarding Wall Street’s expectations, META stock currently features a consensus rating of “moderate buy.” Compared to three months ago, the overall assessment remains unchanged. However, the magnitude of bullishness dipped, with fewer analysts rating Meta either a “strong buy” or “moderate buy.”

An Intriguing Proposition for the Patient Investor

While banking on specific options trades represents higher risks for market participants, the optimism toward META stock also aligns with fundamental justifications. Put another way, you can either trade META as a short-term opportunity or invest in it for the long haul.

To be fair, prospective stakeholders should be prepared to absorb bouts of sharp volatility. At the same time, the fundamental headwinds against the technology giant may be overdone in terms of its forward implications. For instance, while the digital advertising slowdown presents anxieties, businesses still have to compete. That opens the door for Meta to focus on its Facebook platform.

As well, management may eventually recognize economic realities and concentrate instead on what works; that again would be Facebook. Particularly, Elon Musk’s takeover of rival social media firm Twitter may offer a hidden lifeline to META stock.

Controversially, Musk stated that he is a free speech absolutist. However, if he lets this sentiment become the guiding force at Twitter, the platform could become a free-for-all for the internet’s dark underbelly. And let’s be honest: advertisers don’t want their brands to be anywhere near objectionable content.

Therefore, what’s bad for Twitter could be good for Facebook, which in turn might bode well for META stock. Of course, this dynamic doesn’t speak to the predictability of success for near-expiry options contracts. However, should an investor want a compelling deal in the broader tech space, Meta Platforms presents a risky but enticing opportunity.

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