Trade Alert - (FB) January 17, 2018
When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline.
Trade Alert - (FB) - BUY
BUY the Facebook (FB) February, 2018 $160-$165 in-the-money vertical bull call spread at $4.10 or best
Opening Trade
1-17-2018
expiration date: February 16, 2018
Portfolio weighting: 10%
Number of Contracts = 24 contracts
This is a bet that Facebook (FB) will not trade below $165 by the February 16 options expiration in 22 trading days. Don't pay more than $4.50, or the risk/reward will tip against you.
This may seem to you an excessively conservative approach to take. However, we are in a vastly over extended market with a notoriously volatile name.
We have been presented with a rare gift in the form of a buyable dip in (FB), the first among the FANG's, triggered by the company's announcement that it was changing its advertising model.
So I am going to dive into the elevated FANG's for the first time this year and buy the Facebook (FB) February, 2018 $160-$165 in-the-money vertical bull call debit spread at $4.10 or best.
It says a lot about the company that the last time I issued a Trade Alert on Facebook during the summer, it was priced at $145, compared to today's $177.
On Thursday, Facebook announced it would overhaul how it ranks the posts, videos, and photos that appear in its users' News Feeds, introducing major changes designed to put what friends and family have to say first.
It is doing this clearly to prevent the "siloing" of readers' news flow that led to the widespread distribution of hyper aggressive marketing, false content, as well as outright garbage.
The options under the News Feed tab on Facebook will allow users to prioritize the pages (and friends) whose posts they are most interested in.
Without that kind of explicit direction, though, Facebook's top priority will remain posts from your friends and family.
Sellers who dumped the stock by 6.34% on Friday believe the new policy will hurt the company's future add revenues. I think it will do the opposite, allowing (FB) to charge higher ad rates for a better quality service.
I am giving risk a wide birth here given the extended state of all markets by going with the upper $165 strike. That way, the shares could fall another 8.02% and we'd still make the maximum profit on this position. Think of it as not a home run, or not even a single, but a bunt.
Remember, we still have (FB)'s Q4 2017 earnings report to deal with onJanuary 31, 2018, which are probably going to be great, and based on the old ad model.
If you can't do options just start scaling into a new (FB) position through buying one third of you shares here, and the rest later. I'm expecting at least another 20% of upside from here.
Sell short 24 February, 2018 (FB) $165 calls at....................$14.90
Net Cost:....................................................................................
Potential Profit: $5.00 - $4.10 = $0.90
(24 X 100 X $0.90) = $2,160 or 21.95% profit in 22 trading days.
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.
If you are uncertain on how to execute an options spread, please watch my training video on How to Execute Vertical Call and Put Debit Spreads by clicking here.
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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 done, don't worry. There are another 250 Trade Alerts coming at you over the coming 12 months.
