Mike Khouw's Facebook Trade

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On
CNBC's "Options Action,"
Mike Khouw shared with viewers his options trading strategy in
Facebook IncFB
.

He thinks the stock is going to continue to outperform in the long run, but he thinks it might slow down in the short term; he wants to use options to profit from such a scenario. He wants to sell the May 155 call for $1.55 and buy the September 155 call for $5.80.

The trading structure would cost him $4.25, and he is hoping that the May expiration call is going to expire worthlessly. If that happens, he would significantly decrease the cost of the September expiration call, and he would improve his chances to make money in case the stock continues to trade higher in the long term. After the May expiration, he can further decrease the cost of the trade by turning it into a call spread.

Posted In: CNBCOptionsMarketsMediaTrading IdeasMike KhouwOptions Action
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