Trade Alert - (FB) - BUY
BUY the Facebook (FB) April, 2018 $150-$160 in-the-money vertical BULL CALL spread at $8.60 or best
Opening Trade
3-19-2018
expiration date: April 20, 2018
Portfolio weighting: 10%
Number of Contracts = 12 contracts
Information warfare has finally become a trading issue.
In the wake of disclosures that the UK based Cambridge Analytica improperly held on to the customer data of 50 million accounts has triggered the biggest selloff in Facebook shares (FB) in four years.
For the first time in ages, Facebook is now selling at a screaming discount to the main market, with a PE multiple of only 17X, compared to 19X, and 15X if you strip out cash on the balance sheet. Facebook has in effect become another Apple (AAPL) in valuation terms.
Fundamentals have not changed. Some 66% of advertisers say they will increase their spend over the next year.
Regulatory fear is overdone, and it is difficult to image in what form that such regulation would take. What, an (FB) friend tax on your account?
The worst case is that founder Mark Zuckerberg may have to undergo an unpleasant appearance in front of the technophobes in congress.
The company is growing at a compound 30% annual rate and is far and away the dominant player in it a deeply moated space. In other words, it is still a company whose shares you should die for.
Nevertheless, I am going to be very cautious here, buy the Facebook (FB) April, 2018 $150-$160 in-the-money vertical BULL CALL spread at $8.60 or best.
This is a bet that (FB) shares will not trade below $160 by the April 20 options expiration in 24 trading days.
Notice that I am being more cautious than usual with this trade, given the seasonality and the great height of the market. I am going for short duration, deep in the money, and a wide $10 spread. And the stock has just sold off a breathtaking $15, or 8.1% in only two days.
Don't pay more than $9.00 for this position or you?ll be chasing.
If you don't do options, close your eyes and buy Facebook shares outright.
Here are the specific trades you need to execute this position:
Buy 12 April 2018 (FB) $150 calls at.............$24.70
Sell short 12 April 2018 (FB) $160 calls at....$16.10
Net Cost:...........................................................$8.60
Potential Profit: $10.00 - $8.60 = $1.40
(12 X 100 X $1.40) = $1,680 or 16.28% in 24 trading days.
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To see how to enter this trade in your online platform, please look at the order ticket above, which I pulled off of?Interactive Brokers.
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Please keep in mind that these are ballpark prices only. There is no telling how much the market can move by the time you get this.
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The best execution can be had by placing your bid for the entire spread in the middle market and waiting for the market to come to you.
The difference between the bid and the offer on these deep in-the-money spread trades can be enormous.
Don?t execute the legs individually or you will end up losing much of your profit. Spread pricing can be very volatile close?to expiration.
If you don?t get it done, don?t worry. There are another 250?Trade Alerts?coming at you over the coming 12 months.