FB Analysis

Facebook Inc. (FB)

Update 1/30/2018: FB turned to the downside on the Fisher Transform metric, and I exited for a profit. The drop coincided with a general decline in blue chip stocks.

The signal came a day before the mandatory date of exit required to avoid the earnings announcement.

Shares declined by 1.2% over seven days, or a -61% annual rate. The options position produced a -19.5% loss for a -1,015% annual rate.

I have entered a short bull put spread on FB, using options that trade for the last time 17 days hence, on Feb. 9. The premium is a $1.78 credit and the stock at the time of entry was priced at $187.35.

I made the decision to enter the trade in my account based on a positive earnings surprise predictor of 2.04% and a bull rating from Zacks and an uptrend signaled Jan. 22 by the Fisher Transform metric.

FB publishes earnings on Jan. 31 after the closing bell.

Implied volatility stands at 30%, which is 2.7 times the VIX, a measure of the volatility of the S&P 500 index.

FB’s IV stands in the 78th percentile of its annual range and the 79th percentile of its most recent broad movement.

The price used for analysis was $187.39.

Premium: $1.78 Expire OTM  
FB-bull put vertical Strike Odds Delta
Long 180.00 69.1% 28
Break-even 183.22 62.4% 35
Short 185.00 55.7% 41

The premium is 71.2% of the width of the position’s wings.

The risk/reward ratio is 1.8:1.

The bid/ask spread was 3.8%.

By Tim Bovee, Portland, Oregon, Jan. 23, 2018


Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

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