NaughtyPines

FB EARNINGS PLAYS

NASDAQ:FB   FACEBOOK INC
FB             announces earnings tomorrow after market close, so look to put on any play in the final hours of the NY session.

Here are the two possible plays that may naturally require strike adjustment in light of any movement the underlying experiences during the trading day:

FB             Feb 5th 81.5/87.5/107/113 $500 BP             Iron Condor
Probability of Profit %: 69%
Max Profit: $101/contract
Buying Power Effect: $499/contract
Break Evens: 86.49/108.01

FB             Feb 5th 87.5/107 Short Strangle
Probability of Profit %: 71%
Max Profit: $150/contract
Buying Power Effect: Undefined Risk
Break Evens: 86/108.5

Notes: Look to take off the entire setup at 50% max profit and redeploy the buying power elsewhere; one side or the other when it reaches near worthless (<.05/$5); and be prepared to roll on the break of a side prior to expiration out for duration, selling an oppositional side against for a credit that exceeds the cost to roll the tested side.

Comment: I went with a 81.5/87.5/105/111 Iron Condor for a .96 credit fill. Right now it's up to 105.70 or so; if that sticks, the call side will be in breach. I'll look to take off the put side at or near worthless as soon as practicable and wait more toward expiration to see whether I'll need to roll the call side.
Comment: Covered the short put side for .05; have a few more days here to see if price retreats, hopefully saving me a roll out.
Comment: Looking like a roll out will be required in the absence of some fairly hefty profit-taking ... .
Comment: I'm looking to roll this out another week to the 106/114 for an additional credit to give myself some more time to be right. Naturally, I'll still need some pretty hefty profit taking to occur ... .
Comment: An afterthought on that roll: keep in mind that although I'm improving my short call strike a bit (it ain't much) and getting a little extra time here to be right, I'm also widening the spread (which increases its risk/max loss).
Comment: Rolled the 105/111 out to the Feb 2nd 106/114 for a .30 credit and proceeded to sell a Feb 2nd 98/106 short put vertical for a .39 credit to buy some time for price to settle, as well as hedge against further upside.
Comment: With my short call side nearing max profit, my plan is to close that side out on Tuesday and then look at what I can do with short put side in terms of rolling out. Mostly likely, I will just roll it out "as is" (same strikes) for duration, for which I'll pay a debit. I will then proceed to sell a short call spread against that rolled out short put spread for a credit which exceeds the roll out cost.
Comment: Covered my short call side for a .22 debit; rolled out the short put side "as is" to the Feb 19th expiration (98/106) for an .08 debit and then sold a Feb 19th 109/117 short call spread for a .62 credit, so that the entire roll is net on credits (.62-.08=.54 net credit). Lather, rinse, repeat ... .
Comment: Right now, my setup is a 98/106/109/117 iron condor. The call side is nearing worthless, but anything could happen running into expiration, since its 14 Period ATR remains above 4 bucks and its current price is 102. Unfortunately, we're in a truncated trading week with Monday being Presidents Day, so I'll probably have to scramble at the last moment to do any rolling if my take profit isn't hit on Tuesday.
Comment: Closing out the short call side for a .05 debit and attempting to roll out the short put side "as is" another week to give the trade additional time to work out.
Comment: Rolled out the put side "as is" for a .29 debit and selling a Feb 26th 106/114 short call spread for a .70 credit, so now I've got a 98/106/106/114 iron butterfly.
Comment: With this upmove, covered the short put side for an .85 debit, so I'm back to either rolling the short call side or waiting to see what it does with 4 DTE.
Comment: Staying mechanical and rolling the short call side out "as is" another week; my platform is currently telling me that I can actually do this for an .86 credit. I believe that when I see it at NY open ... .
Comment: Correction: a .64 credit ... . Still, can't beat getting a credit for the roll of a tested side if that ends up being the case.
Comment: Rolled out the short call side as is to the March 4th expiry for a .64 credit on this down move and matched it up with a 97/100 short put spread for an additional .31 credit, resulting in a March 4th 97/100/106/114 iron condor. With all the credits collected, I'm nearing scratch for the trade, but am hoping to get out of it for 50% max profit for the original setup. Duration is a beautiful thing ... when it works out.
Comment: Figured I'd get out at scratch while I could and redeploy the buying power on a higher probability setup; closed both sides today, resulting in a loss of .04 ($4/contract) when all was said and done.
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