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Dan Nathan's Options Strategy In Facebook

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On CNBC's Options Action, Dan Nathan suggested that investors should consider a bearish options strategy in Facebook Inc (NASDAQ: FB).

He thinks that the stock is probably going to trade above $100 before the company reports earnings on Wednesday, but after that he expects a pull back to the mid $80s. Investors should exploit high implied volatility and make a bearish bet or set up a protection if they are long, added Nathan.

He would buy the February 95 put for $3.40, sell two February 85 puts for $1 and buy the February 75 put for $0.30. The put butterfly would cost him $1.70 and if the stock trades below $93.30 and above $76.70, at the February expiration, the trade is going to be profitable.

It can maximally make $8.30, if the stock trades to $85. Below $85 the profit starts to trail off and it reaches zero at $76.70.

Nathan would wait for Facebook Inc to reach $100, before he makes the move.

Posted-In: Dan Nathan Options ActionCNBC Short Ideas Options Markets Media Trading Ideas


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