Facebook Inc. (FB)

Update 2/7/2017: FB reached its target price and I exited for a profit. 

Shares declined b7 0.6% over six das, or a -36% annual rate. The options position produced a 33.3% yield on debit for a +2,028% annual rate.

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FB publishes earnings on Wednesday after the closing bell.

I shall use the MAR series of options, which trades for the last time 44 days hence, on March 17.

Implied volatility stands at 30%, which is 2.6 times the VIX, a measure of the volatility of the S&P 500 index.

FB’s IV stands in the 55th percentile of its annual range and the 87th percentile of its most recent broad movement.

The price used for analysis was $132.68.

Premium:	$9.12	MAR	iron fly
FB		Odds	Delta
Calls
Long	150.00	91.7%	10
Break-even	139.12
Short	130.00	43.1%	61
Puts
Short	130.00	57.2%	39
Break-even	120.88
Long	115.00	90.5%	8

The premium is 52% of the width of the position’s wings.

The risk/reward ratio is 1.2:1.

Decision for My Account

I have entered a position on FB as described above. The stock at the time of entry was priced at $132.74.

By Tim Bovee, Portland, Oregon, Feb. 1, 2017