Buying A Call Option On Facebook $FB

| April 22, 2015 | 0 Comments

FB OptionsBuying A Call Option On Facebook $FB

Social media has been something of an enigma to investors.  On one hand, it’s the ultimate growth industry in the age of mobile devices and ever-present Internet connections.  On the other hand, it tends to lack predictable earnings.

It’s not unusual for an up and coming industry to focus on growth rather than earnings.  However, in some cases, social media companies don’t have a clear path to profits.  The business models may not yet be proven successful.

But, that’s clearly not the case for Facebook $FB.

$FB, as you surely know, is the bellwether social media company.  With over a billion users, many of us have our own Facebook page.  Moreover, a large percentage of people are at least somewhat active on the site.

Facebook stock has had a good, but not great year.  At about 6.5% gains for the year, it’s well ahead of the S&P 500 in terms of performance.  But, the shares are only up about a half percent over the last month.

Currently, $FB is trading at $83.69.  That’s 53% from the 52-week low, and just 3% from the 52-week high.

So is now the time to buy a call option on $FB?

As a reminder, a call option makes money when the underlying stock goes up.  Is $FB getting ready to surge?

For a more in-depth look at Facebook’s business, you can click the link.

Here’s the deal…

$FB has earnings coming out today after close.  Investors are already bidding up the stock in anticipation of strong results.  Analysts expect revenue growth and margins to be robust.

Speaking of analysts, most of them love the stock.  In fact, the company just got two more buy recommendations this week and a price target of $100.  No wonder investors are excited…

Facebook has really been pushing new technology and products.  So far, the results have been well-liked by shareholders.  And don’t forget, the company is also leading the charge on the virtual reality front.  That could be a major source of revenue and innovation in the future.

Here’s the chart of $FB:

call option buying opportunity, a chart of $FB

As you can see above, the stock has slowly started climbing after a long sideways period. After hovering above the 50-day moving average, the shares have broken out to the upside over the last month or so.

Now could be a great time to buy a $FB call option

If earnings as are strong as anticipated, the stock could be ready for a breakout.  Not to mention, the company is a leader in social media and constantly finding new ways to innovate and improve.

As such, buying a medium-term call is in order.  The September 90 calls are trading around $3.50.  That’s a reasonable price to pay considering the time to expiration and significant upside potential of the stock.

Yours in Profit,

Gordon Lewis

Note: Gordon Lewis has been trading options for more than 15 years and he now writes and edits for Optionstradingresearch.com.  You can sign up for the newsletter and get a free research report. We are your go-to source for top notch options trading research.

 

Tags: , , ,

Category: Call Or Put Options?

About the Author ()

Gordon Lewis is the Chief Investment Strategist and editor for the popular daily newsletter – Options Trading Research. He’s also editor of our dynamic theme-based options trading service, Advanced Options Adviser, and one of the key analysts behind the highly successful Options Trading Wire.

Leave a Reply

Your email address will not be published. Required fields are marked *