Reload Free Profits from Facebook Inc (FB) Stock

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Facebook Inc (NASDAQ:FB) is as close to a sure a thing as you can get with equities. It will be very hard to mess up over a billion users. In the long term, FB stock should do well as long as markets in general hold up.

FB stock: Reload of Free Profits from Facebook Inc (FB) Stock

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So, is it too late to buy FB at all-time highs? Not if I use options. Ten days ago I shared a long FB pair trade that is delivering profits out of thin air. Today I will set another bullish trade. Here, too, I will leverage the long-term value in the Facebook stock to collect premium.

Fundamentally FB stock has an incredible user base of people who are engaged daily. Wall Street values its management efforts and innovation. They’ve even forgiven them for several bad metric issues.


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Investors so far have been willing to forgive a bit of bad math for the time being. But this is a potential problem if it persists. Powerful metrics have been the basis of FB’s success and if marred, the effects could be devastating much like what happened with Chipotle Mexican Grill, Inc. (NYSE:CMG). CMG lost its ability to leverage its incredible comps to drive the stock higher.

FB Stock Trade Idea

The Bet: Sell the FB $100 Jan 2018 put for $1.80 per contract. This is a bullish trade that needs FB stock to stay above the sold strike through expiration.

If FB falls below that price, I will be put the stock at that price, so I better be willing and able to owning the shares then. This worst case scenario would mean that I’d be long FB at a 30% discount from current levels.

Selling naked puts is aggressive and not suitable to all investors. I can moderate the trade by turning it into a credit put spread instead.

The Alternate: Sell the FB Jan 2018 $105/$100 credit put spread for about 50 cents. This too is a bullish trade that has a 90% theoretical chance to yield 10% on risk. With limited risk come limited gains but here I have a finite risk structure. This spread has a slightly smaller buffer from current price but statistically viable for my taste.

I am not required to hold my trades through expiration. I can close them at any time for partial gains or losses.

Learn options as easy as 1-2-3 here. Nicolas Chahine is the managing director of SellSpreads.com. As of this writing, he did not hold a position in any of the aforementioned securities. You can follow him on Twitter at @racernic and stocktwits at @racernic.

Nicolas Chahine is the managing director of SellSpreads.com.


Article printed from InvestorPlace Media, https://investorplace.com/2017/03/facebook-inc-fb-stock-reload/.

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