There has been some trade chatter about a 4 million dollar block trade on Facebook that appeared on the NASDAQ last Friday. Block trades like this alone are not necessarily bullish and can occur for many different reasons. The scenario which seems to capture imaginations the most is that a large short seller is covering a position, or perhaps even more unlikely, a large fund adding to a very bullish position. This might have been the case years or even decades ago, but modern day markets are different. We are seeing many ‘painting the tape’ techniques such as this generate interest in a stock and lure investors. It’s an illegal practice, but it’s also a money-maker for the exchange and so a blind eye can be turned to it if the paper is there to back it up and it’s not too blatant.
Below is a Stocktwits chat that we initiated on the subject, and a few of the legitimate non-bullish reasons for large block trades like this to go through late in the the last day of the week of options and stock futures expiration…
Lots of excitement about that big $FB block trade on Friday… careful: there could be many non-bullish reasons for that happening.
@Intellikon could you name just a couple? curious
@Intellikon Better yet! Name one! Bullish
@mknmoney covering of a large short call position… maybe a market maker rebalancing a delta hedge
@custodamc also, $FB futures expired on Friday so block trade could have been part of delivery
@Intellikon ok that makes sense, thanks for the info
@Intellikon I agree too much nonsense about block trade… Still long and bullish on $FB, however, cautious, VERY…! :-) Bullish