You need about 150k margin plus our spread margin to do that and your broker is probably require quite a bit more. If you are buying calls on a whim and selling calls to make a ratio spread through earnings with weekly's, your broker wont give you level 4 approval no matter how much money you have.
First of all nobody but you would initiate a 80 90 bull call spread initiated with the lower leg $3 itm.
If you sold 90 strike, for a net of a nickel after earnings, you would not be very smart. With these trades you would not have level 4 approval. Your broker would laugh at you. I don't believe you sold naked. If you created a 80 90 bull call spread and filled both legs it probably cost you more than just buying and 80 strike call.
To say that you bought at 2.50 and sold at around 4.60, to net 20K is an obvious lie. No one should care what you write but on the same token people should know that these are poor plays. How and are you the only one who made money buying calls through earnings. Your numbers do not add up
It is all based on expectation. The big thing though is that this is not much of reaction either way. You have to understand that FB is no longer momo and it is not going to move fast. It is mature company now. Rev growth is great but earnings growth is horrible this paints two different pictures.
There are two camps.
Besides AMZN, there is not another stock that has a higher PE than FB in stocks that are above 100b market cap. Growth is slowing so multiples must contract. Whether the future is bright or not, FB is valued 3 to 5 years in the future at current growth rates.
The other side sees user growth and big advertising growth and expect to see accelerated growth in the near future. They believe that the 60% growth may be possible in the next year or two.
You are likely to see numbers differently than someone else. It doesn't mean you are wrong or they are wrong. It is just what you see and they see. Overall the stock is pretty pat at this point and that is just the market. Your expectations probably fall in line with your position and you see growth accelerating and others who are selling see growth slowing.
I think Monday will be the best day to start observing the trend and see where the stock is going to go. A bunch of positions are being unwound so the next couple of days will not tell the whole story.
The best way to look at the market is to look at the market as a whole and follow the market rather than hoping that your shares follow the way you want the market to move.
There is some big volume off the lows of the day. Typically these are swings or pivots on average volume. This should make a fairly interesting day tomorrow with weeklies expiring. There are some sellers along with the buyers otherwise this would have been a big push upward.
If the big buyers go away, 84-85 are potential pins with decent OI. Expect a lot of volatility tomorrow in this scenario. If the buyers stay, there could be a dollar or more blip towards the end of tomorrow which will come after the option mm have wound their positions.
Should be an interesting day tomorrow.
All of us who have traded have suffered big loses. You just have to take it as real learning and get back up.
IA while back, I hit the option lottery on a stock called Immunex. I got the high leverage big bucks. I blew it all in a period of two months and lost over 10 grand beyond that. When I traded RIMM, and ,GOOG, I knew people who lost their houses trading front month otm options.
I changed my trading and traded very conservatively after that. Anyone who has traded options for any length of time knows that you cant trade options through a known event like earnings and make money over time. There is a huge gain every once in awhile but if you chase it eventually you will lose.
None the less, we are all gamblers. Take the lesson and move on.
Good luck in the future and tomorrow is another day.
It is not going to beat 125 between Q1 and Q2. There is a possibility of the stock not doing as badly and somehow there is a positive spin on the stock tomorrow (I tend to think it wont be great quarter but I will wait until Monday and see what it looks like after the dust settles) .............but
This earnings is not going to set it parabolic and it has to go up quite a bit before Q2 to make it to $125 by the end of summer.
Between commissions and fills, it would have been very hard to get 80 strike calls for $2.50. Extrinsic has been around $1.50 to $2.00 ATM/ITM. FB was briefly at $80.48 last Friday. At about every other point it has been higher than 82.00. Add the intrinsic to the extrinsic and add the bid ask spread of around $.15 and commish and it is a fair amount higher than $2.50.
With volatility crush, FB will need to be at 90 for you to make 99 and change for you to make 90K after commish. There will be very little extrinsic value tomorrow.
Unfortunately it is not taking off.
The implied volatility means that the people buying options are expecting a large move. The sad thing is that these people are paying sky high premiums and very few make any money. This is typical of earnings. The implied volatility shows expectations of the option buyers and the premium is high because buyers are willing to pay a high price for the potential of a big move.
Aside from that the volume is pretty pat so most of the stock holders are seeing status quo. I think that what you see at $88.00 for good announcement is about in line with where it could go. Other than that there are a lot of players at $85 most of the higher numbers are not being played and not with the volume of the last report. I think a few people are learning their lesson and trying to play closer to the money.
There is a lot of option speculation this time around
Probably wont happen anytime soon but if it did the market would know before any announcement because both entities in china and FB could announce the news.
FB is not momo anymore. The ipo, and drop are all in the past. Everything is solved and Facebook is a mature company. To rise 25%, FB would need to report something extremely amazing and also give a super cc. Just a good report wont cause it to rise that much. There is no pent up pressure because there has been a nice rise between quarters.
Let's break this down a bit. If you have a loan, there is principle and interest. You can expense the interest but unless you have something to depreciate it would be hard to expense. Your interest would be the same gain on one hand as the loss was on the other hand. Trades cannot be depreciated because they are not a tangible item like a car or furniture. All the time you would have to create two taxable entities. One way would be to form a business.
Now if you set up a business, sole proprietor, S corp, or LLC, your taxes are flow through and the loan would most likely wash on the balance sheets.
If there was an advantage, having the business and profit associated with your trading would be subject to self employment taxes which are little over 15% ad would be taxed up to $117,000. You could deduct half of that on your taxes and the remainder would be subject to normal tax rates.
You might be able to form C corp but if you did you would be most likely be considered comingling of funds.
In any case most scenarios will be out of one pocket and into the other What nets a gain on a taxable entity nets a loss on the other.
That is one nice cup and handle. The rear part of the cup is almost as high as the cup is deep from the front. I'll bet if I were to break off half of the front of my coffee cup it would look just like that. Oh yea and just jagged also.
I think Bill O'Neil would be proud of your call on this C&H.
No cup and no handle. Even if there was the stock broke out 12.5 points in Feb. No pattern no pressure. If FB does well in the market eyes, the stock will do well. If it does poorly in the markets eyes, it will do poorly. There is no pent up pressure due to coiling or C&H.
There is a lot of implied volatility before earnings. Every once in awhile there is a big enough gain to create the illusion that tons of money can be made buying options into earnings. Most people don't realize that a good portion of the premium on options is gone after earnings. I have seen many options that cost 4 dollars go to zero after earnings.
Options are a bad game through earnings!