Otm options are a bad bet. The prices are sky high. It is a much better bet to be straight long.
If there is a big move, there could be money made but for the most part options are not a good play through earnings.
To collect two million dollars, you would need to have 60 million in your margin account.
What happened to the 20 million that you made? .........Or was that a lie? Some people will say anything.
How much are you getting paid to post all this spam? A nickle a post?
Anyway just checking up on you buddy. Can we call you Spamkumar?
Are you saying the center point of the options are 106?
The center or the max pain are both around 110. April 29 expiry are better indicators than May 20. However both of those numbers can change substantially between now and expiry based on earnings. The bet looks to be around 110 but that is not indicative of where the actual price will be and most of the people making the bets really have no idea where it is going to go.
I think that FB over time is going to do well over time.
However, you cant mix GAAP and non-GAAP numbers together.
94 was not a multiple, it was a PE
The difference between a multiple and a PE is that a multiple is based on non-GAAP numbers and multiples are listed in the future. Current PE has nothing to do with a multiple. The PE is calculated by the trailing GAAP earnings. Future multiples or future numbers (numbers that have not been reported yet) are based on non-GAAP numbers.
Last year FB reproted actual EPS of 1.29 but the non-GAAP number was 2.28. You cant take a PE and multiple it by a future consensus estimate. The GAAP is not quite half the non-GAAP but it is close.
Even if you cross multiplied the numbers it would not be $450.
Based on a 94 PE and a $3 eps , Price/share (pps)=(Price/Earnings)(Earnings/share) or pps=PExEPS=(94)(3)=$282 not $450 and as we stated before we cant multiple a PE by a consensus estimate to get a future number.
Based on a $3 consensus and last years consensus of $2,28, the pps should be 3.00/2.28=1.32 times the stock price at the time of the post.
Red I am not trying to be a stinker but I just cringe when I see numbers used in this manner. It is not because I am a purist but it leads to numbers that are not corrct.
I don't think many people know the difference between a GAAP number and anon-GAAP numbers. It is important to know. FB is assessed on non-GAAP numbers and if there were such a thing as multiple being used instead of a trailing PE, you could use the multiple to look forward but this multiple would be based on a number that is almost twice the actual so at the time that FB had a PE of 94, this multiple would be 53 (1.29/2.28)(94)
But with all this said, FB is not based on a value metric and will be based purely on market perception. This is called a growth stock.
At money calls will not be 2 or 3 dollars after earnings. Most of the value right now is implied volatility.. There is no implied volatility after earnings. The only value that you have is a little bit of time. On the same token you could have bought 118 for 1.45. If it goes up to 120, then you made easily 2 to 3 times the money that you made with a 120.
I know you are trying for leverage but otm calls are the bets that people make when they don't have a lot of money because they are cheap. If the stock goes up $7, your contract will be worth next to nothing. and other options will have some value. Some contracts will double the money.
The second thing you are doing is giving a very small period of time for the stock to rise. Statistically, the stock does not move that much through earnings especially Q1 earnings. Last quarter was a bit of an anomaly..
Does not matter what FB does in the long term your bet is basically for a lit more than a week. Instagram, whatsapp, ect., does not matter in a tiny window. You have no idea how they will report nor do I.
If it does not go itm, you lose. I have been trading options for over 30 years and does not matter the stock but most option plays most of the time are losers through earnings. Far OTM plays are bad bets. You can make just as much for the dollar spent if you buy closer to the money so why would you buy that far out? The premium is crazy. You do what you want but this is not a good play for most people and it has very good chance of failing and if you do succeed in making money you would have made more if you bought options closer to the money.
120 strikes are a far way bet. When you consider a couple of things.
Your break even will be around a little less than a $10 rise. At $1.12 plus commission for 120 strike call, you have to get the option very close to the money to make profit. Every single option contract under a 120 strike will outperform the $120 strike. Most of the value of the options are IV which is obliterated after earnings.
On a percentage basis your gains will be the same for 118 and 119 strikes if the stock goes up $15.
No matter how much you like the stock, I would stay far away from otm options. My goodness, you break even only after a little less than a $10 dollar gain. Anything less than about $7 gain will render the option close to zero. There will not be much value left for options that are otm after earnings.
The only bet i would make if you want to get a little leverage with options is one that is deep in the money. You could also try something delta nuetral like a deep in the money vertical spread but the pay out is anemic.
With all this said, to make more on a percentage basis, FB needs to move more than $15.00 otherwise you would make more with strikes lower than $120.
Obviously you are liar and you have no idea how the options market works. That is my only point. You don't even know my trades so you go on ignore. Ha!
OI is 1321 which means there are less than 1321 contracts for both buyers and sellers. There is not 200k contracts, Capish?
You cant make money the way you are suggesting. If you sell puts you need 20% of the strike price in a margin account. You cant sell more options than there is demand.
Most put selling is lower profit lower risk trades. With that said you could also be responsible for covering all the options if you were assigned.
The premium is around a buck. So you would need 200K contracts which is 10 times some of the very high OI. You sell that many and you are going to drop the premium to next to nothing.
You will also need to have 20.000.000 x 20% x 100=$400,000,000.
That is $400,000,000 in your margin account to initiate the trade. Most brokerages would with a bet like this require you to be cash covered which would be 2 billion dollars.
The problem with this trade is you need to be really wealthy and you are actually initiating a volume that is far in excess of the market. 200k OI is huge.
People just bet in sectors. It has been the way it has been for a long time. I remember when I was trading GOOG a number of years ago the same thing happened between YHOO and GOOG's earnings. It seems like it should not happen but it is just the way it is. Eventually the stock over the long run gravitates towards what the market believes it is worth so over time it is a wash. It is hard to watch the stock move on a day by day basis.
It looks like it pivoted off $112. It could pivot again. What is your next level to get to $113? ........or is $113 done for the day?
How do FB and BAC even have anything to do with each other?
I really don't think there is even the remotest connection between Bank of America and Facebook.
It depends on the contract strike and when it is going to expire. 38% is fairly high for a near term at money contract that is expiring before earnings. Any contract that expires after earnings will have a high IV (impied volatility).
The implied volatility in a nut shell is the conviction of the option players. They are betting that they will make money at the options strike. Implied volatility is a partial differential equation which is not measured the way it is suppose to. It is statistically measured on several different factors.
Long story short if the IV is 38% on a short term contract near the money people are betting that will move in the short term. I would guess that they are expecting about $5.00 movement. This movement could be either way. Options that are far out of the money represent the gamblers and obviously they are betting that the stock will move so they don't represent the middle of the market. On normal times, we could expect 20 to about 30% on FB for ATM options that expire in a month.
If the IV is 38% on options that expire after earnings, that is not that high.
Why is a close above 115.50 bullish? The trend from a month out (3/1 to 4/1) is a little less than $6.00. Momentum is based on linear regression. Based purely on the charts, there is nothing that indicates 120 next week. However, there could be something that happens that would propel FB higher.
There are no coils in a pattern that indicate that there will be a break. If you're looking at momentum indicators like MACD, moving averages, ect., You cant expect it to move above the variance based purely on momentum. So once again why is 115.50 bullish and how can it propel FB to $120? Please explain your reasoning. If it is valid then at least there is credibility to what you say. If it is just what you want to happen it is not credible.
Like I said if there is a some sort of announcement that causes excitement, then the stock could go well above 120. Other than that it cant do it based on the current trend + momentum. It has to make a new trend to do that. Neither you nor I can predict the new trend until after it happens because it is based on something that has not happened yet.
OI is really small this week so the MM's wrapping oiptions does not have much of an effect. As you pointed out, the uptrend on FB is much more than the volume from OE.
The analyst's price targets are for the end of next year or end of 2017. The price target is from one analyst and the average (consensus) price target of all analysts is $133.
FB could very well meet the analysts target if they keep performing and the market agrees with their growth story.
Day trading options is a very hard play. Especially otm short term options. For instance when you see a listing 45 50 bid ask, when you put open at 50, the option ask goes up 55 to 60. If you sell, the option goes down to 40 to 35. You automatically lose .10 to .15 across the spread.
I hope your trade goes well but these plays are very dangerous gambles and many people will lose money on these plays. I have trading options for many years and I have followed and conversed with people on stocks like GOOG ten years ago, CROX, RIMM (When it was RIMM), BIDU, TRLG, TIE, HANS, DNDN, ect. All of these were momo stocks and people used these stock's options to make leveraged plays and many over time lost money.
It is best to play delta neutral plays like credit spreads if you are playing short term options. The amount of money you make is anemic so it does not look like good plays to most people. Option plays do not behave like stocks especially short term options. If you were to graph value with respect to time and underlying stock price, you would find that the option does not follow the stock until it goes deep itm.
I wish you good luck on your trade. I have traded options for many years and I would like to discourage people from day trading or short term swing trading options. I am nbt saying this to be contrary but I have seen many people losing their shirt trying to make large leveraged plays on options. The day trade is better with just stock and it is also better if you swing instead of going one direction.
GL I hope it goes itm for you and you make some money.