Facebook (NASDAQ:FB) operates as a social networking company worldwide. It builds tools that enable users to connect, share, discover and communicate with each other. It enables developers to build social applications on Facebook or to integrate their websites with Facebook. And it offers products for advertisers and marketers to engage with its users. As of February 2, 2012, it had 845 million monthly users and 443 million daily users.
After getting absolutely demolished in the post-IPO frenzy, shares of FB finally put in a decent day during Wednesday’s down market. Obviously, all technicals and fundamentals are farcical at best, so this idea is based on pure gut instinct … but my trader brain tells me that FB is getting a little overdone to the downside short-term.
After pricing at $38 and trading briefly higher, FB shares have been on an unencumbered free fall, dropping nearly 25% to under 29. The shares finally saw a little lift on Wednesday, trading at one point at $29.22.
Bearish sentiment is at extremes, so from a contrarian standpoint, I’ll look to take the other side of a very crowded trade and go long the shares at these levels, with an expectation of a countertrend move to $31 by July expiration.
Based on FB’s closing market price of $28.19 for May 30, using a target price of $31 and a target date of July 20, option strategies to consider include buying an July call butterfly, buying a July call spread, buying a July put butterfly or using another options strategy that best fits your trading style and risk-return objectives.
For the full details on this trade, visit TradingBlock.com, create a free Instant Login and try the TradeBuilder feature, where you’ll see several ways to trade this name. Best of all, you can see a potential profit-and-loss outline for each strategy.
Create your free login, and get access to the details about these FB options trading strategies by visiting TradeBuilder here.
As of this writing, Tim Biggam is currently long call calendar spreads in FB.