One is a much-maligned social media company, and the other is a Dow stalwart. Their common thread? The traders on Friday’s "Options Action" foresee both stocks heading higher. Let’s check out the bull calls on Facebook and Boeing.
RiskReversal.com’s Dan Nathan thinks that precisely the sentiment around Facebook stock has been so unremittingly bad, the stock could manage to move higher. That said, he does not expect Facebook to do that soon. With shares continuing to come unlocked, the stock could continue to underperform. So if Facebook has a chance of making an upward climb, it is more likely to do that after November.
To express his thesis that Facebook will likely fall through November, and rise higher after that, Dan recommends buying a call calendar. Specifically, he suggested buying the November/January 22-strike call calendar for $0.45. His trade and breakdown are below.
DAN’S FACEBOOK TRADE
• SELL THE NOVEMBER-22-STRIKE CALL FOR $0.60
• BUY THE JANUARY 22-STRIKE CALL FOR $1.05
HOW DAN’S FACEBOOK TRADE MAKES MONEY
• PROFITS ABOVE $22.45 BY JANUARY EXPIRATION
• LOSSES BELOW $22.45 BY JANUARY EXPIRATION
On to the next bullish trade.
Oppenheimer’s Carter Worth looked at a long-term chart of Boeing, and made the call that it is set to make a sharp move to either the upside or the downside. So which one will it be? Well, Carter points out that in this market rally, small caps have participated, but the Dow Transports have lagged. That is not a trend that Carter believes will continue. And as the transports start to “join the party,” so, too, will Boeing – which tracks the transports closely. Thus is Carter a Boeing bull.
CRT Capital’s Mike Khouwagreed with the bullish sentiment, and suggested buying the November 75-strike call for $1.25. He wasn’t the only one who liked that idea, either— this morning, the Nov. 75-strike call was the second-most traded Boeing call of any strike price or expiry. Mike’s trade and breakdown follow.
MIKE’S BOEING TRADE
• BUY THE NOVEMBER 75-STRIKE CALL FOR $1.25
HOW MIKE’S BOEING TRADE MAKES MONEY
• PROFITS ABOVE $76.25
• LOSSES BELOW $76.25
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