Facebook: A Simple Trade For Advanced Investors

Seeking Alpha2021-10-27

Summary First, I briefly discuss Facebook's recent price action. Second, I quickly explore the factors driving uncertainty. Third, I explain an options trade that appears rational now. aprott/iStock...

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免责声明：本文观点仅代表作者个人观点，不构成本平台的投资建议，本平台不对文章信息准确性、完整性和及时性做出任何保证，亦不对因使用或信赖文章信息引发的任何损失承担责任。

精彩评论

GrowGrowGrow
2021-10-27
GrowGrowGrow
Grow
Pierre0520
2021-10-27
Pierre0520
Like
- Jkrapido:
  K
- Aun9:
  K
- TraderJo98:
  Ok
- Pierre0520:
  Ok
bobotrader
2021-10-27
bobotrader
Latest
- JFK:
  Ok
SSim
2021-10-27
SSim
Like pls
HeatWave
2021-10-27
HeatWave
Yes FB is a good investment
- Kayabunz:
  yes!
Ninjachips
2021-10-27
Ninjachips
👍🏻👍🏻

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Most stocks are elevated. In any event, we do have better buying opportunity for FB's common equity right now. Here's why:\nData by YCharts\nThat's in one month. And, in the last three months, FB is down about 15%, before adding in the 4-5% drop today. Perhaps that's good enough. Buying FB directly could be quite rational. (I opened a small starter position today.)\nYou would be in the company of at least six Seeking Alpha authors who are bullish, and ready to pounce. This is in the span of less than 24 hours:\nSource: Seeking Alpha\nWall Street is quite bullish with a price target of $416. In fact, 43 analysts are bullish or very bullish, and just two are bearish or very bearish.\nFurthermore, the quants are also super bullish. See for yourself:\nSource: Seeking Alpha\nNow, all of this said, you'll notice that \"Valuation\" is a glowing red \"D+\" and that's really what gives me pause.\nLet's break that out:\nSource: Seeking Alpha\nPlease notice that I've drawn two boxes around some of this valuation data. First, the purple box mostly tells me that despite the recent 10-15% decline, FB is still a wee bit overvalued compared to peers, via a Sector comparison. Maybe this is justified because it's a world class operation, and perhaps not.\nSecond, you can see that FB is almost entirely \"off\" from its own 5-year numbers, with respect to valuation. That tells me that FB is slowing down, or at a minimum, there's friction inside and outside the company. I think most FB investors are aware of all of this friction, which impacts growth:\n\nFB advertising challenges due to Apple iOS privacy changes\nGovernment crackdown and related regulation sabre rattling\nVarious internal memo leaks and scandals via whistleblowers\n\nThe Market Is Punishing Uncertainty\nIn any case, I think FB is currently in a weird space right now. While I still think of it as a growth stock, it's also taken a real beating. FB is floating along as an odd type of value play. I feel that many investors are trying to look through this fog, wondering what it all looks like on the other side.\nI feel that Facebook is struggling to see its own future. Two examples:\n\nFacebook is planning to rebrand the company with a new name\nMark Zuckerberg Sets Facebook on Long, Costly Path to Metaverse Reality\n\nThese are the vibes of uncertainty. And, the market doesn't like uncertainty, especially if it takes a lot of guessing and money to find the way through.\nAt this point, investors could simply make the decision to buy and hold. As I've already said, that would be a fairly rational approach. But, here, we'll investigate another approach.\nScreaming Buy Under $300\nIn a recent article, I explained how investors could get PLTR for $19.47 or they'd make nearly 16% annualized. It was an options trade, which is what I'm looking at here with FB.\nPlease note, as I said in that PLTR options trading article:\n\n As a quick disclaimer, I strongly encourage you to perform your own due diligence about this trade. Do not simply copy and paste anything. Although I'm using the best possible data I can find, markets are very fluid and it's likely this exact set-up is has already changed - perhaps substantially. Further, options trading inherently carries additional risk.\n You've been warned.\n\nNow, back in June 2021, I wrote:Facebook: The PEG Ratio Surprise. In that article, I said:\n\n Summarizing all of that,\n my screaming buy price is $300. Even at $340 and above, I'm contemplating a small starter position. FB is definitely not a sell.\n\nWith FB at around $315 right now, can we get a screaming buy? That is, can we get FB for less than $300? The answer is \"maybe\" if we use options.\nSelling FB Puts\nThe trade set up is simple:\nSource: TD Ameritrade\nYou can see that we're looking at FB. Also, the expiration date is December 17th, 2021. That's roughly two months from now. And, we've got a strike price of $305, with a bid of $10.30 and ask of $10.40, as I'm writing this. I'm going to assume that we could split the difference and sell at $10.35 per FB contract, for this trade.\nAs another quick sidebar, and warning, the bid and ask are very likely going to change between right now, and when you look. Options tend to be quite fluid.\nIn any case, if you sell one FB put at $10.35, you'd collect $1,035 since each option contract is for 100 shares. You're also agreeing to buy FB for $305 on December 17th.\nIf FB is trading above $305, then the buyer isn't going to ask you buy the shares. They'd be losing money. As long as FB stays above $305, you'll be in good shape.\nOf course, if FB falls below $305, then you're obligated to buy those shares, even if the price is $304, $303, or less.That's the risk.\nOtherwise, you've collected your premium, and if the option expires worthless, you keep your $1,035. Not bad.\nDoing more math, when you're selling the December 17th FB $305 put, you're making 3.61% profit. That's in about two months. Therefore, roughly speaking, that's about 22% annualized profit for your trouble.\nFurthermore, your breakeven price is $294, since you've collected $1,035 and the strike price for this FB put option is $305. In other words, worse case you'd be buying FB for $294 in two months, which is about 7% below today's price of $315. This is your margin of safety, if you're not looking to buy FB shares, and instead simply want to collect the premiums.\nWrap Up\nPlease keep in mind a few more things. You could gain $1,035 on this trade, but at the same time, your obligation is 100 shares at $305 so this is far from zero risk. (Read my disclaimers above again.)\nThe big risk here is that if you are forced to buy 100 shares of FB at $305 and therefore, you'll need just over $30K to handle that trade. Obviously, for many investors, that's a substantial pile of cash to put \"at risk\" for two months.\nAt the same time, in light of that risk, keep in mind that you aren't forced to hold onto options that you've sold. That is, you can always buy your options back, which effectively closes out your trade. This can lock in gains or remove risk faster.\nAll of this said, getting FB for $294 or making 22% annualized is a pretty good deal. I've bought the common stock at $315 to establish a starter position. However, I very much like this put selling trade given the risk-to-reward ratio.\nBigger picture, I'm modestly bullish on FB right now, mostly due to the valuation. There is uncertainty but I think they'll find their way through the mess. In the medium to long term, this should be a good investment. Revenues are growing, profits are growing, it's a dominant player, and the current discount gives investors a reasonable cushion.","kind":"news","is_publish_news":true,"is_publish_highlight":true,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[{"id":855128005,"gmtCreate":1635344381901,"gmtModify":1635345061475,"author":{"id":"3582948757581957","authorId":"3582948757581957","name":"GrowGrowGrow","avatar":"https://static.laohu8.com/default-avatar.jpg","vip":1,"crmLevel":3,"crmLevelSwitch":0,"authorIdStr":"3582948757581957","idStr":"3582948757581957"},"htmlText":"Grow","listText":"Grow","text":"Grow","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":2,"commentSize":0,"repostSize":0,"link":"https://laohu8.com/post/855128005","repostId":1143110905,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"CN"},{"id":855084162,"gmtCreate":1635314879791,"gmtModify":1635314879926,"author":{"id":"4087619312283300","authorId":"4087619312283300","name":"Pierre0520","avatar":"https://static.laohu8.com/default-avatar.jpg","vip":1,"crmLevel":2,"crmLevelSwitch":0,"authorIdStr":"4087619312283300","idStr":"4087619312283300"},"htmlText":"Like","listText":"Like","text":"Like","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":5,"commentSize":4,"repostSize":0,"link":"https://laohu8.com/post/855084162","repostId":1143110905,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"comments":[{"id":6342279,"gmtCreate":1635316259437,"gmtModify":1635316259559,"authorId":3576545773081754,"author":{"id":3576545773081754,"idStr":"3576545773081754","authorId":3576545773081754,"name":"Jkrapido","avatar":"https://static.tigerbbs.com/a99be107d174f7142bc212015c662c11","vip":1,"crmLevel":2,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":855084162,"type":1,"supId":0,"prevId":0,"content":"K","text":"K","html":"K"},{"id":6342268,"gmtCreate":1635315931060,"gmtModify":1635315931176,"authorId":3575694115795487,"author":{"id":3575694115795487,"idStr":"3575694115795487","authorId":3575694115795487,"name":"Aun9","avatar":"https://static.laohu8.com/default-avatar.jpg","vip":1,"crmLevel":4,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":855084162,"type":1,"supId":0,"prevId":0,"content":"K","text":"K","html":"K"},{"id":6342212,"gmtCreate":1635315085663,"gmtModify":1635315085698,"authorId":3555067011639600,"author":{"id":3555067011639600,"idStr":"3555067011639600","authorId":3555067011639600,"name":"TraderJo98","avatar":"https://static.tigerbbs.com/4b2fb6c4a2935a517c3b7b2963f0308e","vip":1,"crmLevel":1,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":855084162,"type":1,"supId":0,"prevId":0,"content":"Ok","text":"Ok","html":"Ok"},{"id":6342196,"gmtCreate":1635314885651,"gmtModify":1635314885678,"authorId":4087619312283300,"author":{"id":4087619312283300,"idStr":"4087619312283300","authorId":4087619312283300,"name":"Pierre0520","avatar":"https://static.laohu8.com/default-avatar.jpg","vip":1,"crmLevel":2,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":855084162,"type":1,"supId":0,"prevId":0,"content":"Ok","text":"Ok","html":"Ok"}],"langContent":"CN"},{"id":855084324,"gmtCreate":1635314859629,"gmtModify":1635314859749,"author":{"id":"3569385786610486","authorId":"3569385786610486","name":"bobotrader","avatar":"https://static.tigerbbs.com/3fea6ab8c2e28782c09c56e02fb53e63","vip":1,"crmLevel":4,"crmLevelSwitch":0,"authorIdStr":"3569385786610486","idStr":"3569385786610486"},"htmlText":"Latest","listText":"Latest","text":"Latest","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":5,"commentSize":1,"repostSize":0,"link":"https://laohu8.com/post/855084324","repostId":1143110905,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"comments":[{"id":6342357,"gmtCreate":1635317569113,"gmtModify":1635317569153,"authorId":3567221235003553,"author":{"id":3567221235003553,"idStr":"3567221235003553","authorId":3567221235003553,"name":"JFK","avatar":"https://static.tigerbbs.com/d8cdaf8b81ae245f2f2ea5ff303a6722","vip":1,"crmLevel":3,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":855084324,"type":1,"supId":0,"prevId":0,"content":"<u>Ok</u>","text":"<u>Ok</u>","html":"<u>Ok</u>"}],"langContent":"CN"},{"id":855083758,"gmtCreate":1635314121989,"gmtModify":1635314122370,"author":{"id":"3573512309350380","authorId":"3573512309350380","name":"SSim","avatar":"https://static.tigerbbs.com/bc347d90f5e5fb868ce6d6c9cf5f4763","vip":1,"crmLevel":3,"crmLevelSwitch":0,"authorIdStr":"3573512309350380","idStr":"3573512309350380"},"htmlText":"Like pls","listText":"Like pls","text":"Like pls","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":5,"commentSize":0,"repostSize":0,"link":"https://laohu8.com/post/855083758","repostId":1143110905,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"CN"},{"id":855083901,"gmtCreate":1635314009103,"gmtModify":1635314009203,"author":{"id":"3581648699031335","authorId":"3581648699031335","name":"HeatWave","avatar":"https://static.tigerbbs.com/df15a10254b322279c673072699eb4cf","vip":1,"crmLevel":2,"crmLevelSwitch":0,"authorIdStr":"3581648699031335","idStr":"3581648699031335"},"htmlText":"Yes FB is a good investment","listText":"Yes FB is a good investment","text":"Yes FB is a good 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