A put warrant, a security for speculating on the future direction of a company’s share price, which predicted Facebook would be at $22 by March, cost 6 euro cents ($0.07) to buy in the week after Facebook went public with an initial price of $38. Today, with Facebook trading at $21.87 at 09.50 am in New York, the warrant is worth 36 euro cents, according to data compiled by Bloomberg.

Facebook, which raised $16 billion in the biggest technology IPO of all time, hasn’t closed above its IPO price since its first trading day and has fallen 21 percent since reporting earnings on July 26 that showed slowing revenue growth and narrower profit margins.

“If you bought the $22 put when Facebook was trading at $38 then you will have earned a lot of money,” said Heiko Geiger, head of public distribution for Germany and Austria at Vontobel Holding AG in Frankfurt, which issued the $22 warrant.

The value of warrants increases as the reference stock approaches the so-called strike price, the level at which the securities profit or not. Investors can sell the securities on for a profit or wait for the stock to move beyond the strike, or into the money, and receive a cash payment depending on how far the stock falls below that level.

Unlike options contracts that are traded on an exchange, warrants are normally issued by banks, exposing the investor to a lender’s credit risk.

“Unless you intend to speculate on prices falling further, it would be good advice to cash in now,” said Geiger.

Tucker Bounds, a spokesman for Menlo Park, California-based Facebook, declined to comment.

Calls and puts

BNP Paribas SA, Commerzbank AG and UBS AG are among lenders that listed 2,082 warrants and certificates on European exchanges since May linked to the shares of the social networking site, according to data compiled by Bloomberg. Banks offered both calls, which profit if the stock rises, with strikes as high as $150, and puts with strikes as low as $12.

Nine of the 10 most traded securities today are puts, Bloomberg data show. Commerzbank sold the security with the largest trading volumes -- a put warrant with a strike of $20, data compiled by Bloomberg show.

A market for trading Facebook warrants began a week prior to trading of the first options contracts on the stock providing an initial indicator of market expectations of Facebook’s value after listing at $38 a share.

In the options market, the five most-owned Facebook options are bearish, and January $20 puts have the largest open interest, data compiled by Bloomberg show. The $20 puts represent 5.6 percent of the total put ownership.

Sales slow

Facebook’s first earnings as a public company, reported on July 26, showed second-quarter revenue growth of 32 percent, the slowest pace on record. Operating margin, excluding certain costs, was 43 percent in the second quarter, a decline from 53 percent a year earlier, amid a fourfold surge in sales and marketing expenses.

The emergence on the market of a glut of new shares in August after the expiry of so-called lockup periods, which bar insiders from selling shares for a period after the IPO, has also contributed to the decline in the stock, said Ken Sena, an analyst at Evercore Partners in New York. Sena, who has a year- end target price of $34.00 per share for the stock, said the challenge of how to boost advertising revenue from mobile devices was also a factor in the stock’s decline.

The decline in the shares of Menlo Park, California-based Facebook nudged co-founder Mark Zuckerberg out of the world’s 10 richest technology billionaires, according to the Bloomberg Billionaires Index.

Meanwhile, senior executives Katie Mitic and Ethan Beard said on Aug. 2 that they’re leaving Facebook to pursue other opportunities, bringing the tally of high-profile management departures since the IPO to three.