amwalalghad :: Facebook Options Debut a Volatility Card

Your English Portal To Arab Economy

Telecom Egypt   11.48        GMC GROUP FOR INDUSTRIAL COMME   1.29        Modern Company For Water Proof   1.03        Ismailia Misr Poultry   2.45        El Arabia for Investment & Dev   0.34        Pioneers Holding   2.84        Ezz Steel   7.86        Egyptian Real Estate Group   6.85        Rakta Paper Manufacturing   4.39        Orascom Telecom Holding (OT)   3.92        Naeem Holding   0.19        Egyptian Iron & Steel   6.87        Northern Upper Egypt Developme   4.93        Canal Shipping Agencies   7.39        Misr Chemical Industries   5.65        United Arab Shipping   0.43        Egyptians Housing Development    1.94        Universal For Paper and Packag   4.94        Egyptian for Tourism Resorts   0.69        Egyptian Financial Group-Herme   7.42        Orascom Construction Industrie   240.82        Modern Shorouk Printing & Pack   7        Upper Egypt Contracting   0.8        Heliopolis Housing   21.65        Raya Holding For Technology An   4.57        United Housing & Development   8.93        International Agricultural Pro   2.1        Gulf Canadian Real Estate Inve   18.08        Alexandria Pharmaceuticals   45.71        Arab Cotton Ginning   2.46        Egyptian Chemical Industries (   7.26        National Real Estate Bank for    11.84        Six of October Development & I   15.03        National Development Bank   6.72        Oriental Weavers   20.66        Arab Gathering Investment   16.29        Egyptians Abroad for Investmen   2.75        Credit Agricole Egypt   9.04        Palm Hills Development Company   1.61        Remco for Touristic Villages C   2.13        Commercial International Bank    29.87        El Ezz Porcelain (Gemma)   1.9        Egyptian Starch & Glucose   5.4        Arab Real Estate Investment (A   0.41        South Valley Cement   3.12        Citadel Capital - Common Share   2.5        Rowad Tourism (Al Rowad)   5.05        Union National Bank - Egypt "    3.25        Ceramic & Porcelain   2.88        El Nasr Transformers (El Maco)   4.78        Egyptian Media Production City   2.31        GB AUTO   27        Sharkia National Food   3.78        Egyptian Transport (EGYTRANS)   7.85        El Kahera Housing   4.97        El Shams Housing & Urbanizatio   2.45        Egyptian Kuwaiti Holding   0.7        ARAB POLVARA SPINNING & WEAVIN   2.11        Cairo Poultry   8.32        Egyptian Financial & Industria   8        T M G Holding   4.03        Asek Company for Mining - Asco   10.66        Misr Hotels   27        Egyptian Electrical Cables   0.56        Medinet Nasr Housing   22.51        Mena Touristic & Real Estate I   1.21        ELSWEDY CABLES   18        Prime Holding   0.91        Al Arafa Investment And Consul   0.17        Alexandria Spinning & Weaving    0.74        Gharbia Islamic Housing Develo   8.41        General Company For Land Recla   16.6        Alexandria Cement   8.9        Arab Valves Company   0.94        Sidi Kerir Petrochemicals   12.4        TransOceans Tours   0.09        Egyptian for Developing Buildi   6.43        Egyptian Gulf Bank   1.24        Kafr El Zayat Pesticides   18.19        Faisal Islamic Bank of Egypt -   35.1        National company for maize pro   11.86        Delta Construction & Rebuildin   4.03        Zahraa Maadi Investment & Deve   48.25        Samad Misr -EGYFERT   3.52        Egypt for Poultry   1.41        Cairo Development and Investme   11.7        Cairo Pharmaceuticals   20.1        Maridive & oil services   0.9        Suez Canal Bank   3.75        Nile Pharmaceuticals   15.81        The Arab Dairy Products Co. AR   73.85        National Housing for Professio   14.39        El Ahli Investment and Develop   4.87        Egyptian Saudi Finance Bank   10.79        Ismailia National Food Industr   5.16        National Societe Generale Bank   25.52        Acrow Misr   19.16        Alexandria Mineral Oils Compan   63.63        Paper Middle East (Simo)   5.59        Egypt Aluminum   12.31        Giza General Contracting   13.12        Middle Egypt Flour Mills   5.82        Extracted Oils   0.6        Assiut Islamic Trading   4.56        Engineering Industries (ICON)   3.95        North Cairo Mills   15.3        Arab Pharmaceuticals   11.88        Grand Capital   5.38        El Ahram Co. For Printing And    10.68        Minapharm Pharmaceuticals   25.49        El Arabia Engineering Industri   13.52        El Nasr For Manufacturing Agri   9.71        Naeem portfolio and fund Manag   1.7        Faisal Islamic Bank of Egypt -   6.76        Natural Gas & Mining Project (   68.26        Housing & Development Bank   13.95        East Delta Flour Mills   31.5        Orascom Development Holding (A   3.22        Memphis Pharmaceuticals   11.12        Abou Kir Fertilizers   134.23        Delta Insurance   5        Cairo Investment & Real Estate   12.18        Cairo Oils & Soap   12.98        Egyptian Arabian (cmar) Securi   0.36        Egyptian Real Estate Group Bea   15.56        Alexandria Containers and good   85.51        Upper Egypt Flour Mills   45.78        Development & Engineering Cons   9.94        Sinai Cement   15.18        Medical Union Pharmaceuticals   28.01        Torah Cement   24.2        Alexandria New Medical Center   46.55        Export Development Bank of Egy   5.04        Egyptian Company for Mobile Se   92.02        Middle & West Delta Flour Mill   32.7        El Kahera El Watania Investmen   4.18        Mansourah Poultry   12.41        Delta Sugar   11.04        Misr Beni Suef Cement   41.21        Egyptian Satellites (NileSat)   6.14        Cairo Educational Services   17.75        Lecico Egypt   7.55        Sharm Dreams Co. for Tourism I   5.3        General Silos & Storage   10.77        Al Moasher for Programming and   0.66        UTOPIA   5.28        Arab Ceramics (Aracemco)   25.4        Barbary Investment Group ( BIG   0.98        

Facebook Options Debut a Volatility Card


Published Saturday, 26 May 2012 12:24 | Written by Amwal Al Ghad

Investors can hope the debut of options on Facebook Inc goes more smoothly than the long-awaited debut of the social networking service's stock on May 18.

While the stock's puts and calls are expected to be popular, the big wild card is volatility and ultimately, the options price, Reuters said.

Traders will get a fresh start on options on the Internet giant when the contracts are offered on c options exchanges on May 29. BATS Options exchange, a division of BATS Global Markets, will list the options on May 30, following its standard practice of listing new options a day later than the other exchanges.

Plenty of uncertainty surrounds the stock, which debuted to much fanfare at $38 and immediately ran into problems.

Facebook's first day of trading was marred by technological glitches, and the company faces criticism that it sold too many shares, overwhelming demand. A week later, the stock was at $31.47, down 17.2 percent.

Options volume is expected to be robust. "It's a cocktail party stock and probably will attract a lot of participation from retail traders," said Steve Place, a founder of options analytics firm investingwithoptions in Mobile, Alabama.

The stock's valuation remains high - the forward price-to-earnings ratio is at about 56, and the stock is expected to stay volatile. Premiums - the price paid for options - must reflect that uncertainty and will be even more difficult to pin down.

"The real issue like everything else in the market is about value, and with Facebook, we simply don't know what their true earnings power is at this moment," said Jeff McAllister, vice president of education at options education website optionsanimal.com in Lehi, Utah.

"The first day of trading is going to be completely speculative to begin with and it will be aggressive - flooded with day-traders trying to make a quick turn in the market. But institutions are expected to be on the sidelines waiting patiently as disciplined traders do."

The options debut will offer opportunities to hedge against or take advantage of volatility in the shares through strategies combining stocks and options.

"From LinkedIn to Zynga to Pandora and now Facebook, the evidence is clear that the one certainty for investors is share prices of social media companies are volatile and will likely remain so," said Gareth Feighery, a founder of options education firm MarketTamer.com in Philadelphia.

PRICING RISK AN UNKNOWN UNTIL TRADING OPENS

Before the IPO, investors had an anchor on what to expect regarding the share price. But in the options market there is no indication of what the demand will be.

So implied volatility, a key component of an options price, which measures the market's perceived risk of future share price movement, remains an uncertainty until the first transactions.

"Figuring out the implied volatility is a chicken-and-egg scenario - that value won't be known until the market opens up, when market makers will gauge the supply and demand to price risk," Place said.

If there is significant demand for options, either through speculators or hedgers, the implied volatility will be elevated, and the price of the option will rise.

Place looked at the implied volatility readings of LinkedIn, Groupon, Pandora, Zynga, Yelp and Zillow from the day their options opened on each of these stocks as well as the stock and options volume.

"Using these past values as a guide, we can expect Facebook options to have a 30-day implied volatility between 65-85 percent," he said. "The mid 70s would be a good estimate."

Facebook is currently valued at about $87 billion, based on a share price on Thursday of $31.88. Shares of the much-anticipated initial public offering have fallen sharply since they opened at $42.05 on May 18.

The company went public at a valuation that built in no margin for error, Feighery said.

GRAB A BOX OF POPCORN AND WATCH VOLUME

Almost 23,000 contracts traded for the first day of LinkedIn, equivalent to 1.3 times the stock volume for that day, according to options analytics firm Trade Alert.

Applying that same multiple for Facebook and assuming it mellows out at 60 million shares per day would equate to almost 800,000 option contracts, said Trade Alert President Henry Schwartz. That may be unlikely since that would exceed the average daily option volume of Apple Inc of about 750,000 contracts.

"We could easily see a couple hundred thousand contracts trading for Facebook options simply because the underlying share volume is so strong and there is so much hype about the IPO," Schwartz said.

Options clearinghouse OCC has designated NYSE Amex Options, owned by exchange operator NYSE Euronext, to be the primary market for Facebook options. Initial strike prices below and above the share price are from $16 to $49, in $1 increments.

International News Videos »

شاهد الفيديو

Turkish people dissatisfied with government's intervetion in Syria

شاهد الفيديو

Wikileaks' Assange seeks asylum in Ecuador �

شاهد الفيديو

G+20 leaders discuss Brazil's slums

شاهد الفيديو

G20 backs efforts to solve eurozone crisis

Local News Videos »

شاهد الفيديو

Oracle 4Q Profit Rises 7% on Software Licenses

شاهد الفيديو

Facebook Defends Ads After Criticism

شاهد الفيديو

Apple Unveils New MacBooks, iOS6

شاهد الفيديو

LinkedIn's Roth on Weekly Most Popular Stories