Bears Swarm to Social Media Giant

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It’s been a rough week for Facebook (FB).

The social media giant dropped almost 7 percent on Monday and at one point today was down another 6 percent following reports it gave an outside firm access to user information. Now management has to deal with a parade of regulators: The Federal Trade Commission, Congress, even the British are jumping on the bandwagon.1 Forget about “likes.” Now it’s all about lawyers.

Bearish trades lit up across the options market, with put volume swelling to 586,000 contracts. That not only outpaced other members of the S&P 500 by a wide margin. It was also FB’s biggest total since October 2013.

Even before news about the research firm, Cambridge Analytica, broke over the weekend, some negative vibes seemed to be percolating in the stock. In January management saw planned changes to its widely used news feed reducing traffic. Then later that month, usage in the key North American market had its first drop ever.2

Facebook (FB) put volume
Facebook (FB) chart showing put volume.

Worries went beyond the world of finance in February as actor Jim Carrey urged his fans to drop the social network.3 Then consumer-products giant Unilever publicly criticized the platform and threatened to cut ad spending.4 A German court ruled FB had broken rules on personal-data usage.5 Two separate researchers also found signs of slowing traffic and market share losses — especially for younger users.6

It hasn’t gotten much better this month, with management trying to backpedal on its news-feed changes and marketing agencies reportedly wary of buying some types of ads. Then you also have CEO Mark Zuckerberg dumping shares left and right.7

All told, FB’s in the midst of its biggest two-day slide in over a year. It’s also the second worst-performing company in the S&P 500 so far this week.


1. Bloomberg: FTC Probing Facebook for Use of Personal Data, Source Says. 3/20/18. CNBC: Facebook CEO Mark Zuckerberg summoned by UK lawmakers to give evidence on Cambridge Analytica scandal. 3/20/18.

2. CNBC: The number of people using Facebook daily in North America dropped for the first time. 3/20/18.

3. CNBC: Comedian Jim Carrey urges people to delete their Facebook accounts and dump the stock. 2/6/18.

4. The Wall Street Journal: Unilever Threatens to Reduce Ad Spending on Tech Platforms That Don’t Combat Divisive Content. 2/11/18.

5. Reuters: German court rules Facebook use of personal data illegal. 2/12/18.

6. Agence-France Presse: Less-cool Facebook losing youth at fast pace: survey. 2/12/18. Business Insider: This graph tells you everything you need to know about Facebook’s problem with falling use. 2/20/18.

7. CNBC: Zuckerberg has sold more Facebook stock in the last 3 months than any insider at any other company. 3/20/18.

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David Russell is VP of Content Strategy at TradeStation. Drawing on nearly two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them appraised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.