Earnings Trade Ideas for Facebook

• Posted by Greg Harmon
• on October 28th, 2014

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Sale Ends October 31st!

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Facebook, $FB

Facebook, $FB, is testing the trendline at the top of a rising wedge into their earnings report after the close Tuesday. Shorter term it had a steep run higher off of the bottom of the wedge to new all-time highs. The Relative Strength Index (RSI) is bullish but slowing its rise with the MACD rising, supporting a move higher. There is support lower at 79.25 and 76 followed by 72.90 and 70.60 before 68.10. There is no resistance higher. The reaction to the last 6 earnings reports has been a move of about 9.65% on average or $7.85 making for an expected range of 73.15 to 88.85. The at-the money October Straddles suggest a smaller $5.95 move by Expiry Friday with Implied Volatility at 89% above the November at 44%. Short interest is low at 2%. Open interest favors the 80 Strike if it stays in this area and if it reacts well there is large open interest at the 85 Strike. A drop following earnings sees open interest spread out between 70 and 80.

Trade Idea 1: Buy the November 82.5/October 83 Call Diagonal for $1.02.

Trade Idea 2: Buy the November 14 80/85 Call Spread for $2.15.

Trade Idea 3: Sell the October/November 75 Put Calendar for a $0.68 credit.

Trade Idea 4: Buy the November 7 79/75 1×2 Put Spread for free.

#1 is straight directional upside play for the longer term. #2 is an alternative. #3 gives short term downside exposure looking for a bounce to follow. #4 gives downside but uses margin and offers a possible entry at 71.

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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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