Todd Horwitz's Facebook Inc Trade

Todd Horwitz of BubbaTrading.com spoke on Bloomberg Markets about an options strategy in Facebook Inc FB.

He thinks that the stock might make a large move and he wants to use options to make money if that scenario happens. Horwitz wants to sell two February 26, 104 strike calls and two February 26, 104 strike puts and use the proceeds to buy three February 26, 106 strike calls and three February 26, 102 strike puts. Basically, he is selling a straddle to buy a strangle, collecting $0.89.

Horwitz is going to make money if Facebook jumps above $109.11 or drops below $98.89. The trade also makes money if the stock trades around $104 at the February expiration. It is going to lose money if the stock trades between $104.45 and $106 or between $103.56 and $102. The trade can maximally lose $3.11.