Facebook has been trading sideways for much of the past six months. But some options traders have found a way to make money no matter what the stock does.
With a few short-term exceptions, shares in the social media giant have stayed generally between $75 and $85 since the end of 2014. But some traders are using that tight range as an opportunity to profit by selling puts.
By selling puts, traders sell the right to sell a stock at a set price within a given time frame. In other words, traders receive some premium to buy a stock at the option's strike price. For that reason, some traders view selling puts as a limit order to buy the stock.
According to options expert Mike Khouw, the best strategy to use to sell puts is one that expires within a three-month period, has an attractive entry price and yields roughly 1 percent per month.