Unprofitable: I lose money on this trade if FB closes under $26.50 or above June 15, 2012. The most I can lose on this trade is the amount I paid for it $1.60.
Reason I Like This Trade: The above levels are approximate levels based on the June ATM Straddle price. The question about Facebook’s valuation is a difficult question to answer right now. How much is a company worth that has over 900 million users that average 14 minutes a day? Well, right now it isnt valued as much as others thought it would be 2 weeks ago. I agree I thought it would surge to the upside, but after it dropped under $38, the IPO price, we see more pressure and the stock is now down almost 25% since then and 35% from the $45 highs. I still think that Facebook has potential, but it is hard to stand in the way of this downward trend. I bought the August-June 30 Call Spread for $1.60. I like this strategy, bc even if Facebook goes lower, I can only lose what I paid for this Spread, $1.60. With only 13 trading days left, FB is implying a 11% move between now and June expiration. Also, if this strategy I am buying the earnings month and I think the stock could rally on earnings. The weeklies get added on Thursday, so I will look to trade those as well. This is a neutral to bullish trade. Hope this helps.
UPDATE 5.30.2012 I want lack of movement in the next 12 trading days and the closer the stock moves to $30 the better. This spread is currently worth $1.70, but I will leave it on until at least June expiration.
UPDATE 5.31.2012 Even with the stock selling off under $27, this Spread is still worth $1.60. I will leave this trade on and hope for any upside move higher.
UPDATE 6.4.2012 This Spread is still worthh $1.60 and this actually is a Bullish Spread, so the closer that Facebook closes to $30, the more this Spread will be worth.
UPDATE 6.5.2012 This Spread is still worth $1.60, and I would like a nice soft landing on June expiration as $29.95
UPDATE 6.7.2012 The Spread is worth $1.60, but I will leave it on until at least June expiration
UPDATE 6.11.2012 With FB rallying today, this Spread is worth $1.75, but I am leaving on until Friday.
UPDATE 6.13.2012 I would this Spread would be worth more, but it is still only worth $1.65
UPDATE 6.27.2012 I took this trade off at $2.20, man I wish I would left this on a little more, oh well, on to the next trade.