Options Action

JPM's Pain Could Be WFC's Gain? Why Facebook Will Gash Google

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Two big names. Two very different trades. That more or less sums up last Friday’s Options Action.

First, the bearish trade. Riskreversal.com’s Dan Nathan thought the Facebook IPO might lead some investors to dump Google  shares for Facebook.

Combined with his concerns about what Google can do with mobile, Dan constructed a bearish trade on the search giant. He suggested buying the June 585/560 put spread for $7.50. His trade and payout are below.

DAN’S GOOGLE TRADE

• BUY THE JUNE 585-STRIKE PUT FOR $14.00

• SELL THE JUNE 560-STRIKE PUT FOR $7.50

HOW DAN’S GOOGLE TRADE MAKES MONEY

• LOSSES ABOUT $579.50

• PROFITS BETWEEN $579.50 - $560

• PROFITS CAPPED AT $560

The banks were a different story. Carter Worth looked to how Citigroup and JPMorgan have been trading, and made the case that unlike those two, Wells Fargo has been able to keep its earnings growth in line with its stock’s performance.

Carter took that to mean that Wells Fargo stock is heading higher. CRT Capital’s Mike Khouw agreed with Carter, and looked to buy a Wells Fargo out-of-the-money call for $0.95. His trade and payout:

MIKE’S WELLS FARGO TRADE

• BUY THE JULY 33-STRIKE CALL FOR $0.95

HOW MIKE’S WELLS FARGO TRADE MAKES MONEY

• PROFITS ABOVE $33.95

• LOSSES BELOW $33.95

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