FB Analysis

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.

Premium: $6.35 Expire OTM  
FB-iron fly Strike Odds Delta
Long 165.00 92.7% 8
Break-even 158.85
Short 152.50 53.2% 49
Short 152.50 46.8% 51
Break-even 146.35
Long 140.00 91.1% 8

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

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