HAL9000

Earnings upcoming: Get options exposure

NASDAQ:FB   FACEBOOK INC
THE BACKDROP ON FB: A STOCK WE LIKE TO OWN
The stock is up some 7.5% since we recommended to buy at $118.69. We are currently in the middle of the up-channel and the stock looks overbought and ready for a consolidation, probably until earnings are out (expected Feb 1). Owners should hold on to positions (see earlier idea "Three times lucky?") Non-holders of the stock and those who would like to increase exposure should do it synthetically through one of the credit-strategies highlighted below.

CREDIT OPTIONS STRATEGIES TO PLAY THE EARNINGS
With a "strong buy" rating from the consensus of analysts and an average target of $153.17/Share (+20%), expectations are high. Meanwhile, there is a significant resistance above our head at the historical high of $133.50 (+4.5%), and high expected volatility around earnings (+5.3%). In this context, Sell the 120 put for a chance to go long at a lower price if the stock falters, and buy a call just above the historical high if the stock breaks out. And get paid to wait.

Sell FB             17Feb17 $120 PUT = $1.61 (Ind.)
Buy FB             17Feb17 $135 CALL = -$1.41 (Ind.)
Total = +$0.20 (Ind.)

Sell FB             17Feb17 $120 PUT = $1.61 (Ind.)
Buy FB             10Feb17 $135 CALL = -$1.26 (Ind.)
Total = +$0.35

Sell FB             24Feb17 $120 PUT = $1.71 (Ind.)
Buy FB             3Feb17 $135 CALL = -$1.05 (Ind.)
Total = +$0.66
Kommentar: Healthy consolidation from overbought levels. Hammer on the daily chart provides potential bullish reversal, in line with SPX comment posted today. Stay long into earnings - For now.
Kommentar: Fabulous earnings, stock trading around $138 after market, which would mean another breakout above historical highs ($133.50). Our options strategies are now potentially all deeply in the money and can be cashed (or converted at your leisure).
Kommentar: Made a new intraday high but failed in 2x volume at the close. These historical high levels are difficult to breach. Still technically positive in the shorter time frame, but just so. Caution required. Stop-loss at $129 - level at which the uptrend would be momentarily compromised.
Kommentar: FB is still in breakout mode, and has managed to close above its previous historical high of 133.50. However, it is showing some mixed/exhaustion signals as it consolidates after a good run: Positive hammer yesterday, but we are yet to close above the intraday high reached on Feb 2nd at 135.49. RSI very close to overbought levels and MACD has turned negative on the daily chart. HOLD positions and maintain stop-loss at $129.
Kommentar: Previous high at 135.49 has just been breached. Keep an eye on a close above this level today. This is happening in 50% more volume than the average, thereby giving credence to the move. Owners keep holding. New money: There could be an opportunity to buy this historical breakout on a close above it. Will be monitoring and updating tomorrow.
Kommentar: FB closed above its previous historical high on higher-than-average volume. This breakout should be bought into, with staggered stop-losses at 133.50 and 130.00. Investors following this trade recommendation would be putting an average $2.87/Share at risk, with unlimited upside - My scenario is for initial upside to $145 (R/R 3x).
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