As of today, FB has closed with a nice solid candle to the upside, breaking a 3 day tight consolidation range, on top of the 0.618 Fib Level.
If we take the Trend Based Fib Extension tool and use the low of July 2017 at $147.80, the high of July at $175.49 and the low of $161.56 in September, our conservative target at the 100% level, brings us to $189. Stop Loss should be placed at $176.75.
The best way to play this move, will be to purchase the Delta 70+ December 15 $177.50 Call for $5.80 and sell the December 1 $182.50 Call for $1.25 against it (Diagonal). If the price moves above $182.5 by December 1st, our long calls will be called for a net profit of ($182.5-$177.50) - ($5.80-$1.25) = $5 - $4.55 = $0.45. On the $5 wide spread, this represents $0.45/$5 = 9% ROR over a time span of 7 trading days. On an annualized basis, this will be amazing!
On the other hand, if the price remains below the $182.5 by December 1st, we get to keep our collected premium of $1.25, reducing our cost basis down to $4.55 ($5.80-$1.25). Then, we can turn around and either sell the December 8th $182.5 for $1 and further reduce our cost basis & risk to $3.55 ($4.55-$1), or let it ride towards our target $189, trailing it with the 8 EMA on a closing basis.
If we sold the December 8th $182.5 for $1 and now the price has jumped above the $182.50, our profit is $5-$3.55 = $1.45, or $1.45/$5 = 29% over 12 trading days.
Or, if we let it ride and by December 15th, it has hit our $189 target, then over the course of 17 trading days, the profit will be $189 - ($177.5+$3.55) = $7.95, or $7.95/$3.55 = 224%.
Happy Trading
Lindosskier
If we take the Trend Based Fib Extension tool and use the low of July 2017 at $147.80, the high of July at $175.49 and the low of $161.56 in September, our conservative target at the 100% level, brings us to $189. Stop Loss should be placed at $176.75.
The best way to play this move, will be to purchase the Delta 70+ December 15 $177.50 Call for $5.80 and sell the December 1 $182.50 Call for $1.25 against it (Diagonal). If the price moves above $182.5 by December 1st, our long calls will be called for a net profit of ($182.5-$177.50) - ($5.80-$1.25) = $5 - $4.55 = $0.45. On the $5 wide spread, this represents $0.45/$5 = 9% ROR over a time span of 7 trading days. On an annualized basis, this will be amazing!
On the other hand, if the price remains below the $182.5 by December 1st, we get to keep our collected premium of $1.25, reducing our cost basis down to $4.55 ($5.80-$1.25). Then, we can turn around and either sell the December 8th $182.5 for $1 and further reduce our cost basis & risk to $3.55 ($4.55-$1), or let it ride towards our target $189, trailing it with the 8 EMA on a closing basis.
If we sold the December 8th $182.5 for $1 and now the price has jumped above the $182.50, our profit is $5-$3.55 = $1.45, or $1.45/$5 = 29% over 12 trading days.
Or, if we let it ride and by December 15th, it has hit our $189 target, then over the course of 17 trading days, the profit will be $189 - ($177.5+$3.55) = $7.95, or $7.95/$3.55 = 224%.
Happy Trading
Lindosskier