Trade Update Closing $FB July Aug Call Calendar For A Gain

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TradeUpdateJuly19th,2013?

GivenFBsrecent~14%rallyoffoftheJunelows,andthestocksweaknessthismorninginsympathywithGOOGscpcresults,IamgoingtoclosetheJuly/Aug25CallSpreadIboughtinMaywhenthestockwas$24。

50?

Theoriginalpremiseofthetradewasthatthestockwasoversoldandthatthesentimentwasgettingverybad?

AsweheadintonextweeksQ2results,andgivenGOOGscommentaryonmobileadswethinkitmakessensetoclosethispositionforthegainandtakeanotherlookafterFBsprint。

Action?

FB($25。

80)SoldtoClose?

July/Aug25CallSpreadat。

85fora。

27gain

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PreviousPostJuly16th?

ConsideringOurOptions$FBJuly/AugCallCalendar

Facebookhasmadeafairlystealthy18%rallyoffoftheJunelowsapproachingunchangedlevelsontheyear?

WithJulyexpirationquicklyapproaching?

itstimetothinkabouttrademanagementonourFBcallJuly/AugcallcalendarthatweinitiatedonMay31st(below)aswethoughtsentimentwasgettingatadtonegativeandthatQ2earningscouldbeapotentiallypositivecatalystforthestock。

Torecap,herestheoriginaltrade:

TRADE:FB($24。

50)BoughtJuly/Aug25CallSpreadfor。

58

Sell1July25Callat。

97

Buy1Aug25Callfor1。

55

Thestockisnowthroughthe25strikeenoughthattheJulyoptionisessentiallytradingatparitytothestock。

Augustvol(40)isrampinghigherrecently,butstillmuchlowerthanpreviousearningscycles,although,FBdoesnthavealonghistoryoftradingtogooffofanditmakessensethatvolwillsettleasmoreisknownaboutthestocksearnings。

Letslookatthegreeksofthepositionthatmostaffectanydecisionsthatneedtobemade:

Delta:-22

Vega:0。

03

Theta-0。

02

Clearlythebiggestissuehereisthedeltas。

Thepositionstartedasaslightlybullishtradebutwiththestockwhereitis,itsturnedbearishasfarasdeltasgo。

Thepositionisrightontheedgeofbeingaloserbecauseofthoseshortdeltasandthatwillmostlikelydeterminewhetherwetakethetradeoffsoonorletitrideout。

Ifthestockweretoreverseandgoalittlelowerbacktowardsour25strike,theothergreekscomebackintothedecisionmaking。

Augustvolshouldgohigherintotheearnings(7/24aftertheclose)ThisisgoodforthepositionasforeveryvolpointhigherinAug,thepositiongainsabout3cents(vega)。

Theproblemisthepositionloses2centsadayindecay(theta)。

Essentially,thevegagoingupintoearningswillover-ridethedecay,butbothtakeawhoopingtoAugustpremiumassoonasearningsareout。

SoaswegetclosetoJulyexpirationalotwillbedeterminedbywhichdirectionisnextinthestock。

LowerandwerelikelytoseeadecentprofitonthepositionandwouldeitherlooktotaketheentirethingoffortaketheJulyoffandspreadtheAugustoptions。

(Wedmostlikelytaketheentirethingoffandnottaketheriskofearningsdirectionally)Ifthestockstaysstrongwehaveatougherdecisiontomakeaswelleitherhavetoclosetheentirethingatawashorasmallloss,orclosetheJulyandtrytoridetheAugustcallstoprofitabilityintotheevent。

Butthatsnotlikeustostaynakedlongacallintoanevent。

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OriginalPostMay31st,2013at2:32pm?

NewTrade$FB:ZuckintheMud

FromFBsMayhighsonthe2ndtothelowsthispastWednesday,thestocknearlyenteredofficialbearmarketmode,downalmost20%,beforebouncingafterreceivingacoupleratingsupgradesyesterdaybyJeffriesandBMO?

(here)。

FB1monthdailychartfromBloomberg

OnTuesday,ItookalookatthetechnicalsetupforFBintheMorningWord,andconcludedthatthestockwasapproachingafairlydiresupportlevel,whichitendedupbreakingthenextday?

Givenyesterdaysbouncebackabovetheallimportant$24level,Iwouldsuggestthatafterbeingrejectedthismorningatits200daymovingaverage?

thestockneedstostabilizeatorabovethislevel。

FB1yrchartfromBloomberg

Thenextcoupletradingdayswillbeveryinterestingforthisstocktoseeifinfactitcanstabilizeabovesupportoritjustresumesthedowntrend?

Oneofthebigreasonsinmymindforthestocksunder-performancethisyearvsthebroadmarketanditspeershasalottodowiththesentimenttowardstheproductsandpossiblyalackofunderstandingbyinvestorsastohowFBwillincreaseuserengagementwiththeirservices,whethertheybeontheircomputers,tabletsorsmartphone?

Itismyopinionthattodateasapubliccompany,FBmanagementhasdoneapoorjobofintroducingproductslikeSocialGraphandmostrecentlyHomewherebytheytriedtotakeapageoutofSteveJobsplaybookbyannouncingamediaeventandrolloutthefounderforthebigsplashbutinFacebookscase,italmosteverymajorproductannouncementhadtheleastbitofWowFactorattached?

Zuckrisksbeingtheboywhocriedwolfwithtoomanyproductmisfires。

Asamarketparticipant,abusinessownerandanindividual,IcantellyouthatFBservesveryfewpurposesformybusinessormeindividually,andIdontseeahugefuturefortheexistingproductofferingswithoutsomemajortweaksthatcoincidewithaquicklychanginguserdemographicandonlinebehavior?

Thatbeingsaid,watchingJimCramerofCNBCsMadMoneydescribesomeoftheissuesfacingthestocknearterm(below),gotmethinkingthatwithsentimentsopoor,thenextidentifiablecatalyst(Q2earningsinlateJuly)couldsetthestageforarallyontheslightestbitofgoodnews?

Thecommentthatstuckouttomewasthatinamarketwhereinsidersareselling?

shortshaveafreefirezoneinthestockbecausetheresnobuyback,insiderselling,nodividend,noclarity?

WhileFBthecompanyistryingtofinditswayinaverycompetitivespace,thestockistradingwithonearmtiedbehinditsbackfromaninvestorstandpointastherearefewincrementalbuyersanditlackssomeofthecharacteristics(buybacks,dividendsetc)thatseemtobeapillarofthelongcaseformanylargecaptechstocks。

CramerQuickTake:LongLookatFacebook

SOwhileIremainverymixedonthecompanyandtheirproducts,ifthestockcouldstabilizeinthis$24-$26areaoverthenextcouplemonthsandestablishanewbase,thestockcouldsetupforare-testofthe$30levelfollowingabetterthanexpectedQ2。

Iwanttocreateastructurethataffordsmetheopportunitytohangaroundforsuchaneventwithouthavingtotakemuchdeltaorvolrisk。

TRADE:FB($24。

50)BoughtJuly/Aug25CallSpreadfor。

58

Sell1July25Callat。

97

Buy1Aug25Callfor1。

55

Break-EvenonJulyExpiration:

Barringmajorshiftsinimpliedvolbetweenthemonthsoramassivemoveupordownthisstructurewillnotdoaheckofalotinthenear-term。

Whereitdoesreallywellisaround25inthestockaswegetclosertoJulyexpiration。

JulywilldecayquicklyatthatpointwhileAugust,whichcatchesearningsshouldstaybid?

Maxriskis。

58

TradeRationale?