Facebook Stock Options Combination Trading 11-6 To 11-7

This Facebook stock options trading video will begin at 10:20ct on 11-6.  The facebook stock had just gone into 5 minute chart sell, and a number of options trades were done against the open stock buy at 49.60, to take profit and provide trailing protection:

  • Sell long 49 calls .65 to close at 1.30
  • Buy 49 put to complete +1 49p 1.00 -2 47p 1.00 ratio short
  • Hold short 52.5 calls

And as noted, the short calls-long puts component of the position will give synthetic short option protection for the long stock, if the previous swing doesn’t resume – this is a key component of our stock options combination trading.

If we keep going down, then the stock will be exited and the options will then be a short – with the further objective of looking for an entry timing setup to turn the short calls back into a ratio call short.

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So, before going on with the trading day, let’s take a look at the math and breakeven range of our options – look at the options trading spreadsheet for the following:

  • Long stock 49.60 short 52.5 calls 1.40 [short calls – then stock options combination]
  • Ratio put short +49p -47p
  • Calls at 49.00 support area target
    •  I will buy 11/8 expiration – would buy 11/15 but no 49.5 strike yet
    • Little more than 2 full trading days to use
    • 52.5 call short profitable enough that they really don’t need to be spread at this time – could be exited if needed
    • This is mostly for any resumption from this area

Facebook Stock Option Trading Summary 11/6

  • 11:00 – the swing has continued down to 49.17 and then retraced back to 49.54
    • This is a test of 49.56 support-resistance price
    • The price rejected with mex flow – exit the long facebook stock at 49.35
    • 13:15 – there was a price pmd low and reverse back into buy at 49.10
      • Buy 49.5c .60

11/6 Closing Stock Option Position:

  • Flat facebook stock
  • Long 49.5c .60 – 11/8 exp
  • Short 52.5c 1.40 – .37 closing price
  • Long 49p 1.00 short 47p 1.00 – ratio put short 

Facebook Stock Option Trading Summary 11/7

We are going to discuss the 11/7 trading day from the open to around 9:40ct.  Facebook opened up, but then reversed and continued through the previous pmd low that was used for the call buy timing.

  • 9:05 – the 60 min has also reversed and a facebook stock short has been done at 49.15
    • This is Thursday and the weekly options strikes for 11/15 expiration have filled in
    • Sell 2 50.5c .80
    • This call is a ratio short for the next 2 days with the long 49.5c .60
    • The upside breakeven is 51.30 – with resistance prices at 49.87 and 50.45
    • Looking for continuation down through 48.71 and also have that shift to resistance
    • 48.19 47.51 are target support – we discussed these prices from 11-4 – 11-5 trading

Closing Stock Option Position:

Let’s finish this video and review the ratio put short since we are going back down again:

  • +49p 1.00 -2 47p 1.00
  • Breakeven is to 44.00
    • But we are now also short stock at 49.15
    • Making the ratio short a covered trade
      • Of course providing the number of ratio shorts syncs with the number of short facebook stock
      • What you are looking at on the profit graph is 1 ratio short unit X 100 short stock

Model the following options – if there is a short option entry timing setup on a failure of 48.19.  Since you would be buying a call and selling a put, you would have synthetic long protection for the short stock at the time.

Additionally, you would be completing a ratio call short for the short calls, while selling puts at a lower strike range than what is previously open – the objective on the potential setup would be to turn the short puts into a ratio put short.

Here are the theoretical value of the options I would use, modelled at a 48.20 underlying price:

  • Long 48.5c 11/15 1.10
  • Short 46p 11-22 .75