What are your options - META What are your options - META What are your options - META

What are your options - META

Koen Hoorelbeke

Options Strategist

What are your options - META


META Platforms Inc., formerly known as Facebook, continues to make headlines. Their latest venture, Threads, is poised to compete directly with Twitter, adding another layer of intrigue to their expansive portfolio. This move has already started to influence META's stock, which has been on an upward trajectory this year. The launch of Threads seems to be fueling this momentum, but the question remains: will this trend continue, will it plateau, or have we already seen the peak?

The answer to these questions is not straightforward and largely depends on individual perspectives and market predictions. In this article, we aim to equip you with three distinct strategies tailored to different market views - bullish, neutral, and bearish. Regardless of your stance on META's future, there are ways to express a view in the options market that aligns with your outlook.

Please note that the strategies and examples provided in this article are intended for educational purposes only. They are designed to aid in the development of a thought process and should not be blindly copied or implemented. Every investor or trader must conduct their own due diligence and consider their unique financial situation, risk tolerance, and investment objectives before making any decisions. Remember, investing in the stock market involves risk, and it's crucial to make informed decisions.

Strategy: Vertical Put Spread (Bullish)

The Vertical Put Spread is a defined risk strategy, meaning that your risk (and profit) is defined upfront. This is achieved by selling a put option at a certain strike price, and simultaneously buying another put option at a lower strike price as insurance. The goal is to profit from a rise in the stock's price, or a price-decline that doesn't go under the short put of the vertical spread.
In the case of META Platforms, Inc., we can construct the following Vertical Put Spread:

Sell to Open META 18-Aug-23 275 Put
Buy to Open META 18-Aug-23 270 Put

The premium received for this strategy is $150, which also represents the maximum potential profit. The maximum risk, or the most you could lose if the stock price falls significantly, is $350. The breakeven point at expiration is $273.5.

The probability of profit for this strategy is 77.86%, with 43 days to expiration. The implied volatility rank is 49.69%.
(the probability of profit is the theoretical probability of profit based on the delta of the options)

This strategy allows you to potentially profit from a bullish outlook on META, while limiting your potential losses.

Strategy: Iron Condor (Neutral)

The Iron Condor is also a defined risk strategy. It involves selling a vertical call spread and a vertical put spread on the same underlying asset with the same expiration date. This strategy is typically used when a trader expects the price of the underlying asset to remain within a specific range until expiration.
In this case, we can construct the following Iron Condor:

Buy to Open META 18-Aug-23 330 Call
Sell to Open META 18-Aug-23 325 Call
Sell to Open META 18-Aug-23 270 Put
Buy to Open META 18-Aug-23 265 Put

The premium received for this strategy is $243, which also represents the maximum potential profit. The maximum risk, or the most you could lose if the stock price moves significantly, is $257. The breakeven points at expiration are $267.57 and $327.43.

The probability of profit for this strategy is 51.87%, with 43 days to expiration. The implied volatility rank is 49.69%.
(the probability of profit is the theoretical probability based on the delta of the options)

This strategy allows you to potentially profit from a neutral outlook on META, where you expect the price to remain within a specific range.
 
Strategy: Vertical Call Spread (Bearish)

The Vertical Call Spread, also known as a Bear Call Spread, is a defined risk strategy that profits from a bearish move in the underlying stock. It involves selling a call option at a lower strike price and buying a call option at a higher strike price, both with the same expiration date. This strategy is typically used when a trader expects the price of the underlying asset to decrease.

Here, we can construct the following Vertical Call Spread:

Sell to Open META 18-Aug-23 320 Call
Buy to Open META 18-Aug-23 325 Call

The premium received for this strategy is $130, which also represents the maximum potential profit. The maximum risk, or the most you could lose if the stock price moves significantly, is $370. The breakeven point at expiration is $321.3.

The probability of profit for this strategy is 62.65%, with 43 days to expiration. The implied volatility rank is 49.69%.
(the probability of profit is the theoretical probability of profit based on the delta of the options)

This strategy allows you to potentially profit from a bearish outlook on META, where you expect the price to decrease.


The strategies explained above are short volatility/limited reward strategies intended to take advantage of a higher theoretical probability of profit. There are of course a lot of other strategies possible. For example: if expecting a significant directional move, you can consider owning a long put or long call strategy, or a long put spread or long call spread. In a future article I'll explain the differences between the short and long strategies in general.

Options Overview by barchart.com

Quarterly Outlook 2024 Q3

Sandcastle economics

01 / 05

  • Macro: Sandcastle economics

    Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.

    Read article
  • Bonds: What to do until inflation stabilises

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain inflation and evolving monetary policies.

    Read article
  • Equities: Are we blowing bubbles again

    Explore key trends and opportunities in European equities and electrification theme as market dynamics echo 2021's rally.

    Read article
  • FX: Risk-on currencies to surge against havens

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperform in Q3 2024.

    Read article
  • Commodities: Energy and grains in focus as metals pause

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities in Q3 2024.

    Read article
Disclaimer

Saxo Capital Markets (Australia) Limited prepares and distributes information/research produced within the Saxo Bank Group for informational purposes only. In addition to the disclaimer below, if any general advice is provided, such advice does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of trading any financial instrument as trading can result in losses that exceed your initial investment. Please refer to our Analysis Disclaimer, and our Financial Services Guide and Product Disclosure Statement. All legal documentation and disclaimers can be found at https://www.home.saxo/en-au/legal/.

The Saxo Bank Group entities each provide execution-only service. Access and use of Saxo News & Research and any Saxo Bank Group website are subject to (i) the Terms of Use; (ii) the full Disclaimer; and (iii) the Risk Warning in addition (where relevant) to the terms governing the use of the website of a member of the Saxo Bank Group.

Saxo News & Research is provided for informational purposes, does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. No Saxo Bank Group entity shall be liable for any losses that you may sustain as a result of any investment decision made in reliance on information on Saxo News & Research.

To the extent that any content is construed as investment research, such content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication.

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments.Saxo Capital Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Capital Markets or its affiliates.

Please read our disclaimers:
- Full Disclaimer (https://www.home.saxo/en-au/legal/disclaimer/saxo-disclaimer)
- Analysis Disclaimer (https://www.home.saxo/en-au/legal/analysis-disclaimer/saxo-analysis-disclaimer)
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)

Saxo Capital Markets (Australia) Limited
Suite 1, Level 14, 9 Castlereagh St
Sydney NSW 2000
Australia

Contact Saxo

Select region

Australia
Australia

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-au/about-us/awards

Saxo Capital Markets (Australia) Limited ABN 32 110 128 286 AFSL 280372 (‘Saxo’ or ‘Saxo Capital Markets’) is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms, Financial Services Guide, Product Disclosure Statement and Target Market Determination to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Saxo Capital Markets does not provide ‘personal’ financial product advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Capital Markets does not take into account an individual’s needs, objectives or financial situation. The Target Market Determination should assist you in determining whether any of the products or services we offer are likely to be consistent with your objectives, financial situation and needs.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website is not intended for residents of the United States and Japan.

Please click here to view our full disclaimer.