(Reuters) – Traders will have their first crack at using options to hedge their bets or speculate on the direction of Facebook shares in two weeks, when U.S. options exchanges expect to list contracts on the hot new stock.
“There is a lot of excitement around Facebook and investors are anxious to trade it by any means possible, either through the stock or its options,” said TD Ameritrade chief derivatives strategist J.J. Kinahan.
“So it is not surprising that the options exchanges are finding a way to make that happen as fast and efficient as possible.”
Facebook shares are set to begin trading on the Nasdaq Stock Market this Friday.
Facebook, the No. 1 social network, expects to raise $12 billion in what would be Silicon Valley’s largest-ever initial public offering, dwarfing Google Inc’s 2004 market debut.
Facebook, based in Menlo Park, California, on Tuesday raised its target price range for the IPO to between $34 and $38 per share.
The International Securities Exchange was the first on Tuesday to announce that it plans to offer options on Facebook on Tuesday, May 29. The all-electronic options market said the options listing date is contingent upon a successful completion of Facebook’s IPO. ISE is owned by derivatives exchange Eurex, which is co-owned by Deutsche Boerse.
Other U.S. options exchanges are expected to follow suit as long as certain thresholds, including trading volumes, are met. May 29 is the first date that options trading could begin on the Chicago Board Options Exchange and the C2 options market, a spokesman for exchange operator CBOE Holdings said.
Investors use options to take advantage of their bullish or bearish view of the stock at a lower cost and lower risk than owning the stock outright. They also offer a way to manage the risk and exposure of their stock holdings.
(Reporting by Doris Frankel; Editing by Dan Grebler)