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Facebook (FB) Is Set To Resume Higher After The Price Correction
Several analysts believe there is further upside ahead for Facebook, here are two of them – Why Facebook Inc (FB) Stock Can Still Run Much Higher and Flagging Facebook Inc (FB) Stock for a Bullish Breakout.
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Technicals
The second article identifies a bull flag pattern which offers a technical signal for a bullish continuation. Alternatively, the price action that takes place from around the end of July to late September can be viewed as a pennant. Both patterns signal the same thing which is a continuation of the bullish trend.
Continuation patterns tend to be respected by technical traders, especially when it follows a strong uptrend which has been the case with Facebook.
*source Tradingview.com
If you agree there's further upside ahead for Facebook, consider this trade which is a bet that the stock will continue to advance, or at least not decline very much over the next seven weeks.
Buy To Open FB 20Oct17 165 Puts (FB171020P165)
Sell To Open FB 20Oct17 170 Puts (FB171020P170) for a credit of $1.59 (selling a vertical)
This price was $0.02 less than the mid-point of the option spread when FB was trading near $172. Unless the stock rallies quickly from here, you should be able to get close to this amount.
If you use our favorite broker for this trade, tastyworks, your commission on this trade will only be $1 per opening contract ($2 per spread) (and there is no commission on closing trades, only the $.10 clearing fee). Each contract would then yield $157 and your broker would charge a $500 maintenance fee, making your investment $343 ($500 – $157). If FB closes at any price above $170 on October 20, 2017, both options would expire worthless, and your return on the spread would be 46% (340% annualized).
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Changes to Investor’s Business Daily (IBD) Top 50 This Week:
IBD Underlying Updates September 1, 2017
We have found that the Investor’s Business Daily Top 50 List has been a reliable source of stocks that are likely to move higher in the short run. Recent additions to the list might be particularly good choices for this strategy, and deletions might be good indicators for exiting a position that you might already have on that stock.
As with all investments, you should only make option trades with money that you can truly afford to lose.
Happy trading,
Terry
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Any questions? I would love to hear from you by email (terry@terrystips.com), or if you would like to talk to our guy Seth, give him a jingle at 800-803-4595 and either ask him your question(s) or give him your thoughts. seth@terrystips.com
You can see every trade made in the actual option portfolios conducted at Terry’s Tips and learn all about the wonderful world of options by subscribing here. Why wait any longer to make this important investment in yourself?
I look forward to having you on board, and to prospering with you.
Terry
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