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.

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