Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Here’s A Bullish Options Strategy In Facebook Inc (FB): Stacey Gilbert

It might not be a bad idea to have a bullish options strategy on Facebook Inc (NASDAQ:FB) given the stock’s performance over the last two years, Stacey Gilbert suggests in a segment of Breakout Session on CNBC.

In the discussion, the expert from Susquehanna International Group first showed a graph courtesy of FactSet of Facebook Inc (NASDAQ:FB)’s closing price over the past year. Yesterday, the stock closed at $78.43 per share. The graph also included the average Wall Street price target for the stock which is currently at $95.88, Gilbert notes.

She adds that since she doesn’t cover Facebook Inc (NASDAQ:FB) fundamentally, she is going to rely on the Street to give her a sense of what the sentiment is. In terms of how the ratings are going, 88% of analysts have a positive rating and there has actually been a decline in terms of negative ratings as there are now only 12% remaining with a Hold rating as the rest have Buy ratings.

According to Gilbert, the difference between the average price target of $95.88 and the closing price today at $78.43 is around 18%. This, believe it or not, she says, is one of the biggest discounts that the company’s stock has seen over the past year in terms of where the firm’s shares have closed versus that average price target.

When the price of the world’s largest social network is compared to the S&P 500, the firm is one of the few companies that are “trading at such a discount to its price target,” Gilbert says.

She then presents Facebook returns over the past two years and it has a “monster” return, she notes, as the stock is up almost 200%. She says that because of the massive rally, she is more interested in using options to limit downside risk while still giving having upside exposure.

However, when buying options, investors may want to know where implied volatility is, she cautions. Nonetheless, Facebook’s implied volatility is declining and it is currently at 5th percentile over two years, she says.

To get embedded protection by limiting downside risk through options, she suggests that an investor can opt to buy options that are trading historically at one of the lowest levels that has been observed over the last two years.

“Specifically, I’m looking at the July 17, 2015 expiration. I’m looking at the Facebook 80-strike call offered today at $2.66. My breakeven here is $82.66 – the strike price of $80 per call and what I’m paying for every call which is $2.66. If I’m correct and Facebook rallies here, I have unlimited upside potential because I own the call outright and as shares rally, I’m going to win dollar for dollar on the upside,” she says.

She adds that on the downside, she can be out completely of her initial cash outlay of $2.66. However, if Facebook Inc (NASDAQ:FB) shares decline significantly, that’s the maximum she can be out so she has limited her downside while giving herself upside exposure at a volatility that is near two-year lows.

 Facebook, is FB a good stock to buy, NASDAQ:FB, Stacey Gilbert, options, call options, upside exposure, implied volatility, price target, returns, ratings,

Philippe Laffont’s Coatue Management owned about 7.18 million shares of Facebook Inc (NASDAQ:FB) by the end of the last quarter of 2014.

I just made 84% in 4 daysI Just Made 84% in 4 Days By Blindly Following This Hedge Fund

I just made 84% in 4 days by blindly imitating a hedge fund’s stock pick. I will tell you how I pulled such a huge return in such a short time but let me first explain in this FREE REPORT why following hedge funds’ stock picks is one of the smartest things you can do as an investor. We launched our quarterly newsletter 2.5 years ago and not one subscriber has, since, said ‘I lost money by EXACTLY following your stock picks’. The reason is simple. You can beat index funds by creating a DREAM TEAM of hedge fund managers and investing in only their best ideas. I just made 84% in 4 days by blindly imitating one of these best ideas. CLICK HERE NOW for all the details.

Suggested Articles:

Strategies Hedge Funds Use to Make Huge Returns

Most Expensive Boats In the World

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!