Make Facebook Inc (FB) Stock Pay You Weekly Dividends

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FB stock - Make Facebook Inc (FB) Stock Pay You Weekly Dividends

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Equity investors have been fickle of late. One day, experts tout the value in mega-caps. The next, they toot the need to buy protection and raise cash. This environment makes me nervous and dissuades me from holding even quality stocks like Facebook Inc (NASDAQ:FB). But that doesn’t mean we can’t use equities like FB stock to generate income.

Make Facebook Inc (FB) Stock Pay You Weekly Dividends

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In fact, we can — and should.

Fundamentally, Facebook is beyond reproach. The company had its weak moments shortly after its 2012 initial public offering, but since then, it has been all roses. FB management has Wall Street’s approval over its gutsy acquisitions. Zuckerberg gained the experts’ respect, and now Facebook has the means to put all its plans into action with room for a few mistakes.

I’ve said it before: It’s hard to mess up a billion-user base. In Facebook’s case, it’s more than a billion users, and they’re spread across more than one platform. Better still, FB users are engaged daily, for hours at a time. This is attention management can leverage.

I truly pity rivals like Twitter Inc (NYSE:TWTR) and Snap Inc (NYSE:SNAP). It’s simply unfair to have to compete against this behemoth.

Technically speaking, there’s not much to be said at the moment. FB stock is hovering near all-time highs, but then, so is the broader market. I believe as long as the macroeconomic environment remains unchanged, the bulls are in charge, and we can use that momentum to create income from weekly options.

To do that, I sell puts against short-term support levels in Facebook stock, then watch time do the rest. This allows me to create weekly income at the “risk” of owning a quality stock.

How to Trade FB Stock

The bet: Sell the 25 Aug $165 put and collect 60 cents per contract to open. Here, I have an 80% theoretical odds that price will stay above my strike. Otherwise, I could accrue losses below $164.40.

To mitigate the risk that comes with selling naked puts, I can sell spreads instead. There, the risk is limited to the width of the spread less what I collect to open. Of course, even if Facebook stock goes to zero, I can’t lose more than the finite risk.

The spread bet: Sell the 25 Aug $165/$162.50 bull put spread. I have about the same odds of success but with less money at risk. The spread will deliver 10% in yield if it wins.

In either trade case, I need FB stock to stay above $165 to retain max gains. Both are favorable compared to having to risk $171 at face value with no room for error and expecting a rally over the next two weeks. I would much rather collect a premium against a calculated risk then to buy and hope.

Worst-case scenario, I could be long FB at a 3% discount from today’s price. Long-term, it’s a winner anyway.

Investing in the stock market is risky, so never bet more than you can afford to lose.

Learn how to generate income from options 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/2017/08/make-facebook-inc-fb-stock-pay-you-weekly-dividends/.

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