Facebook Inc. (FB)
Update 5/4/2017: FB gapped to the downside after earnings were published, bringing it slightly below the strike prices of the short options and bringing the gain to 34.6% of maximum potential profit, well above my target of 25%. I exited.
Shares declined by -1.5% over one day, or a -557% annual rate. The options position produced a 53.0% yield on debit for a +19,349% annual rate.
FB publishes earnings on Wednesday after the opening bell.
I shall use the series of weekly options that trade for the last time nine days hence, on May 12.
Implied volatility stands at 25%, which is 2.3 times the VIX, a measure of the volatility of the S&P 500 index.
FB’s IV stands in the 059th percentile of its annual range and the 91st percentile of its most recent broad movement.
The price used for analysis was $152.05.
The premium is 51% of the width of the position’s wings.
The risk/reward ratio is 1:1.
Decision for My Account
I have opened a position of FB as described above. The stock at the time of entry was priced at $151.96
By Tim Bovee, Portland, Oregon, May 3, 2017