The Biggest Ever Pump and Dump: Facebook Inc.’s FB Stock

Facebook Inc. (Nasdaq: FB) stock is well on its way to becoming the penny stock we said it should be after options trading began on what is the biggest pump and dump the stock market has ever witnessed. Facebook started the day behind the 8-ball with a lower open from Friday’s close before dropping -$3.07, -9.62% to close at $28.84 on volume of almost 76 million shares. FB stock is trading even lower than the LOD in after market currently down -0.29, -1.01%, at $28.55. Facebook is well on its way to the $25 level we predicted before the 1st week of June and its taking Zynga Inc. (Nasdaq: ZNGA) down with it.

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FB Stock Chart

Volume on Facebook options soared on their first trading day on Tuesday as the underlying stock plunged below $29 a share for the first time, down more than 23% from its IPO price of $38.

The busiest options contract on FB stock was June $30 strike puts, with more than 18,241 contracts on the tape at an average price of $1.45 per contract, according to Trade Alert.

As FB shares dipped below $30 in afternoon trade, buying picked up in the August $29 strike puts. Put options, generally considered bearish bets, give the holder the right to sell shares at a specific price by a certain date, while calls, generally considered bullish bets, give the holder the right to buy shares at a specific price.

Options volume on Facebook exceeded 200,000 contracts by afternoon trade with 132,000 puts and 94,000 calls, for a put-to-call ratio of 1.41, according to data by options analytics firm Trade Alert. The overall volume is the highest after Apple Inc (AAPL.O). “Current volume implies Facebook may hit 400,000 contracts today, making it the best first-day listing in listed options history,” said Henry Schwartz, president of Trade Alert.

FB Stock Options Day One

Call Options Expire at close Friday, June 15, 2012
Strike Symbol Last Chg Bid Ask Vol Open Int
13.00 FB120616C00013000 2.79 Up 0.09 15.60 16.00 25 174
27.00 FB120616C00027000 2.70 Down 1.20 2.60 2.70 675 211
28.00 FB120616C00028000 2.05 Down 1.35 2.00 2.10 3,153 3,684
29.00 FB120616C00029000 1.55 Down 1.00 1.50 1.55 6,028 204
30.00 FB120616C00030000 1.15 Down 1.35 1.05 1.15 13,300 91
42.00 FB120616C00042000 3.15 Up 0.22 N/A 0.05 9 23
43.00 FB120616C00043000 0.01 Down 0.11 N/A 0.05 45 573
44.00 FB120616C00044000 0.01 Down 0.14 N/A 0.05 3,365 9,985
45.00 FB120616C00045000 5.39 0.00 N/A 0.05 N/A 10
Put Options Expire at close Friday, June 15, 2012
Strike Symbol Last Chg Bid Ask Vol Open Int
25.00 FB120616P00025000 0.40 Up 0.20 0.40 0.45 5,424 618
28.00 FB120616P00028000 1.30 Up 0.70 1.25 1.30 14,393 12,200
29.00 FB120616P00029000 1.70 Up 0.70 1.70 1.80 12,098 23
31.00 FB120616P00031000 3.10 Up 1.75 2.95 3.10 5,987 182
36.00 FB120616P00036000 7.40 Up 1.80 7.20 7.40 89 200
37.00 FB120616P00037000 8.10 Up 1.50 8.20 8.40 804 66
39.00 FB120616P00039000 8.40 0.00 10.10 10.40 15 1,204
45.00 FB120616P00045000 15.90 Up 0.60 16.10 16.40 15 1,723

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Bottom Line: The biggest pump and dump ever witnessed and its not one of the penny stocks on the OTC. Facebook Inc.’s FB stock will be $25 at some point this week which is the only level I would even begin to consider watching the shares at. After the first earnings report comes out and the price plunges on that day, then would be best time to consider if you want to get involved in the biggest pump and dump in the stock market.

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