A Winning Option Strategy in Facebook (FB) January 30, 2017 - Capital Market Laboratories Written by Ophir Gottlieb PREFACE Earnings had an effect on Facebook Inc (NASDAQ:FB) option trading, but not how you might have first guessed. Facebook Inc has set the world on fire with its various social media platforms boasting 1.8 billion monthly active users (MAUs) on Facebook Proper, 1.1 billion on WhatsApp, 1.1 billion on Facebook Messenger and 600 million, now, on Instagram. The user growth as translated into substantial revenue and earnings growth. Here's a chart of both: That growth has turned the stock into a top performer, with a rise of 117% over the last three-years. There is an option strategy that has worked very well for Facebook Inc (NASDAQ:FB) over the last two years, but it's not about guessing stock direction. STORY While we often look at selling puts, selling put spreads is also one of many option trading strategies that can be employed to take advantage of a bull market. For Facebook, it has been a winner if done during earnings releases. But, there's a hidden result that we must address. Here's how the strategy did over the last three-years if we only traded during earnings: While the strategy looks good enough, it actually isn't. Here is the option trading compared to the stock (in gray): We can't get blinded to results that are out of context. Selling those put Facebook spreads during earnings vastly under-performed the stock and that does us no good. As usual, we always examine option trading strategies when earnings are avoided, and in this case, we get a fascinating result: Selling put spreads, which is a risk contained option trading technique, does much better when earnings are avoided. We see a staggering 167% rise, which outperformed the stock by 50% and the strategy won 35 times and lost 6, revealing a 85% win-rate. And just to verify that what we're looking at is some real edge, we can look at selling this put spread over the last 6-months: That's a 63% return versus a Facebook Inc stock price rise of less than 7%. Even further, the put spread won 6 out of 7 times, yet again, a 85% win-rate. These are the gems we seek to uncover with the CMLviz.com Option Back-tester. Methodical, relatively risk averse option trading techniques. Here's the best part, we can identify this trading result for Facebook Inc (NASDAQ:FB) in just a few seconds. WHY THIS MATTERS We've just seen an explicit demonstration of the fact that there's a lot less 'luck' and a lot more planning in successful option trading than many people know. Here is a quick 4-minute demonstration video that will change your option trading life forever: Tap here to see the demo movie on YouTube Thanks for reading, friends. Risk Disclosure Trading futures and options involves the risk of loss. Please consider carefully whether futures or options are appropriate to your financial situation. Only risk capital should be used when trading futures or options. Investors could lose more than their initial investment. Past results are not necessarily indicative of future results. The risk of loss in trading can be substantial, carefully consider the inherent risks of such an investment in light of your financial condition. Please read the legal disclaimers below. Legal The information contained on this site is provided for general informational purposes, as a convenience to the readers. The materials are not a substitute for obtaining professional advice from a qualified person, firm or corporation. Consult the appropriate professional advisor for more complete and current information. Capital Market Laboratories ("The Company") does not engage in rendering any legal or professional services by placing these general informational materials on this website. The Company specifically disclaims any liability, whether based in contract, tort, strict liability or otherwise, for any direct, indirect, incidental, consequential, or special damages arising out of or in any way connected with access to or use of the site, even if we have been advised of the possibility of such damages, including liability in connection with mistakes or omissions in, or delays in transmission of, information to or from the user, interruptions in telecommunications connections to the site or viruses. The Company make no representations or warranties about the accuracy or completeness of the information contained on this website. Any links provided to other server sites are offered as a matter of convenience and in no way are meant to imply that The Company endorses, sponsors, promotes or is affiliated with the owners of or participants in those sites, or endorse any information contained on those sites, unless expressly stated.
A Winning Option Strategy in Facebook (FB) January 30, 2017 - Capital Market Laboratories Written by Ophir Gottlieb PREFACE Earnings had an effect on Facebook Inc (NASDAQ:FB) option trading, but not how you might have first guessed. Facebook Inc has set the world on fire with its various social media platforms boasting 1.8 billion monthly active users (MAUs) on Facebook Proper, 1.1 billion on WhatsApp, 1.1 billion on Facebook Messenger and 600 million, now, on Instagram. The user growth as translated into substantial revenue and earnings growth. Here's a chart of both: That growth has turned the stock into a top performer, with a rise of 117% over the last three-years. There is an option strategy that has worked very well for Facebook Inc (NASDAQ:FB) over the last two years, but it's not about guessing stock direction. STORY While we often look at selling puts, selling put spreads is also one of many option trading strategies that can be employed to take advantage of a bull market. For Facebook, it has been a winner if done during earnings releases. But, there's a hidden result that we must address. Here's how the strategy did over the last three-years if we only traded during earnings: While the strategy looks good enough, it actually isn't. Here is the option trading compared to the stock (in gray): We can't get blinded to results that are out of context. Selling those put Facebook spreads during earnings vastly under-performed the stock and that does us no good. As usual, we always examine option trading strategies when earnings are avoided, and in this case, we get a fascinating result: Selling put spreads, which is a risk contained option trading technique, does much better when earnings are avoided. We see a staggering 167% rise, which outperformed the stock by 50% and the strategy won 35 times and lost 6, revealing a 85% win-rate. And just to verify that what we're looking at is some real edge, we can look at selling this put spread over the last 6-months: That's a 63% return versus a Facebook Inc stock price rise of less than 7%. Even further, the put spread won 6 out of 7 times, yet again, a 85% win-rate. These are the gems we seek to uncover with the CMLviz.com Option Back-tester. Methodical, relatively risk averse option trading techniques. Here's the best part, we can identify this trading result for Facebook Inc (NASDAQ:FB) in just a few seconds. WHY THIS MATTERS We've just seen an explicit demonstration of the fact that there's a lot less 'luck' and a lot more planning in successful option trading than many people know. Here is a quick 4-minute demonstration video that will change your option trading life forever: Tap here to see the demo movie on YouTube Thanks for reading, friends. Risk Disclosure Trading futures and options involves the risk of loss. Please consider carefully whether futures or options are appropriate to your financial situation. Only risk capital should be used when trading futures or options. Investors could lose more than their initial investment. Past results are not necessarily indicative of future results. The risk of loss in trading can be substantial, carefully consider the inherent risks of such an investment in light of your financial condition. Please read the legal disclaimers below. Legal The information contained on this site is provided for general informational purposes, as a convenience to the readers. The materials are not a substitute for obtaining professional advice from a qualified person, firm or corporation. Consult the appropriate professional advisor for more complete and current information. Capital Market Laboratories ("The Company") does not engage in rendering any legal or professional services by placing these general informational materials on this website. The Company specifically disclaims any liability, whether based in contract, tort, strict liability or otherwise, for any direct, indirect, incidental, consequential, or special damages arising out of or in any way connected with access to or use of the site, even if we have been advised of the possibility of such damages, including liability in connection with mistakes or omissions in, or delays in transmission of, information to or from the user, interruptions in telecommunications connections to the site or viruses. The Company make no representations or warranties about the accuracy or completeness of the information contained on this website. Any links provided to other server sites are offered as a matter of convenience and in no way are meant to imply that The Company endorses, sponsors, promotes or is affiliated with the owners of or participants in those sites, or endorse any information contained on those sites, unless expressly stated.