FB just reported earnings yesterday, and the stock dropped around 5%
Here is an example of how you can use Options to structure a new trade on FB
Implied Volatility is still high today, so premiums are good.
This is NOT a trade recommendation, and is only for illustration and educational purposes.
Selling January 115 Puts for 3.25 (naked)
Selling twice as many Call spreads for $1.50
Selling twice as many Call spreads for $1.50
Total collected is the combined dollar/quantity amount.
This trade should only be done if you don't mind owning Facebook at 115, less the total credit collected. This is the downside risk.
The upside risk would be the Call spread risk, minus the 3.25 collected from the Puts.
You could also look at the numbers for December (43 DTE) -you'll get paid faster!
And you could also analyze different ratios, and different strikes.
This is simply to illustrate how to take advantage of high implied volatility, in a somewhat neutral trade,
Another example would be to do an Iron Condor, which is the same trade, but with a Long Put to limit the downside risk and the margin requirement. Of course in this case, you would also not have the risk of being assigned the stock at a discounted price.
