How many people are either shorting or longing puts (or shorting calls) next week? Fb puts have been the only thing somewhat keeping me alive today (still deep red), and whatever the stock price is on November 13th, I will be adding the ATM puts.
For those of you in this, what's your price target on Nov 13th, and what percent do you expect it to decline on Nov 14th. I am setting a realistic PT of 20.xx (low xx) on November 13th, and expecting a 5+% drop (fb dropped 4% on oct 22nd so this is rather conservative) the following day. On Nov 13th, I am expecting the 20 puts to be about 0.50 if fb is at 20.
Short term bet(until Friday's OPEX), is Nov20/19 Bear Put Spread for .60. BE by Friday @ 19.40. Max profit .40/spread @ 19.00 or lower @ OPEX. Max loss .60/spread @ 20.00 or higher by OPEX.
How many think we will be above 19.40(BE) this coming Friday? There are the odds....
Honestly, I normally am all for put/call spreads, but for this I would be just completely bullish, I don't think you even need a hedge here. It's very hard to see how low this one will go, and the ATM puts are still only pricing in a 3% drop from these levels which should be a pretty safe bet. Then with this all this bearish fiscal cliff news... should be a fun week ahead.
Fb earnings were extremely public, probably one of the top 10 most followed earning announcements. It was all over all financial websites. It seemed like all the stars just aligned when FB barely met earnings estimates, and yet stock rose 20%. Short interest fell, and yet over 1 billion shares were about to be released before Nov OPEX. And the ATM puts only had a 5% premium back on October 23rd.
But still, as long as you can get in by Tuesday, you are in a great position. First lock-up shares dropped 6%, subsequent lock-up shares fell 4-5%. With triple the shares unlocking compared to either of these dates, I don't think there's any reason to believe that we won't be seeing an even larger drop. It's amazing how low the IV/premium is right now (relatively speaking). Your BE for the ATM puts is a 3% drop.
picked up the Jan 19 puts last friday for $1.00, thinking that there would be a lot of people jumping ship before the big sell off on the 14th.... Wish I would have bought more, but I may add next week for the quick turn.
I already had a pretty sizable position in the 22 puts (up almost 250% already, and the big lockup isn't even here yet!), but I couldn't resist buying more 19.5 puts today. My original strategy was just to load up next Tuesday afternoon, but it doesn't seem likely this will be positive monday and tuesday.
Still will be making more purchases on Tuesday. It seems like a 10+% drop may be very likely. :)