It's hard to imagine that #Facebook dropped so much after earnings. The record drop in $$ value shocked most investors and what shocks me even more is the fact that it seems like it still hasn't been able to find its footing after going from $323 to $245 and hitting $207 today. It's crazy!
But as an option trader, I always look at ways to capitalise on this movement so let's take a quick look. I don't normally look at the fundamentals in great detail, but the P/E at 15 is an acceptable value.
I am also not a chartist but it certainly appears that there was supposed to be a support around $211...
Given the heavy sliding it's no surprise that the IV rank is over 65, which also makes the stock attractive for option sellers.
Would I trade it?
I would but I already have position in #FB and unfortunately so far it backfired.
The 180/240 strangle seems attractive given that the 1SD (standard deviation) is 188/228.
Credit: $4.10
Capital required (bp): $2000
Expiry: 18 March
Annualised profit potential: 257%
Let me know your thoughts...
Nice winner!
Today I would have closed this trade for $0.95 profit (reminder: it means $95 per trade). It's been only 7 days and the IVR is still very high so we could have rolled this position to April for further credits, but given the major geo-political issues in Ukrain, I believe taking the 23% profit is the best option.
For those of you who are new to this channel here is a super quick summary of this trade:
Invest $2000 and make $95 in 7 days. That's equivalent to 247% annualised return!