Is Facebook (FB) sick? Has FB hit bottom yet? Questions still remain.
My brief interview with 10 Facebook users revealed disenchantment across the board. Some have begun to prefer using Twitter which boasts 340 million tweets a day while others said they enjoyed Facebook more when they were in college. Each person of my small sampling said they pay absolutely no attention to the advertising which has reportedly failed to keep up with growth.
With some investor’s voicing concern for future profits and others looking to buy the stock on sale, it all leads to option strategies:
My friend Ryan recently purchased FB stock at 26 and he is looking to generate some income on a stock that he says is “kind of stuck in the mud down here”. Ryan just sold the June 27 FB calls at a plain .85 cents. He told me he wouldn’t mind unloading his shares at 27 and is pleased to receive the premium for the sale of his call which would give him an effective sale price for FB of 27.85 If Ryan does not get assigned with the obligation of selling his shares, he plans to continue selling calls against his stock ownership with a target sale price in mind for FB.
Selling Puts to Buy Stock
My friend Suyen is long-term bullish on FB stock but not at the current price of 26.55 Her plan is to sell out of the money put options knowing that if she is assigned she will have the obligation to purchase FB shares at the strike price of her choosing. Suyen sold July 24 puts at 1.25 If she gets assigned she has to purchase FB at 24 but with an effective purchase price of 22.75 because of the premium she received for the puts. If Suyen does not get assigned she gets to keep the premium from the sale of the puts with a plan to sell August puts or even weekly puts to generate income while trying to grab FB stock at her set price.
My other friend Katie who already owns FB stock is going to do a combination of the above two strategies. She is hoping to enhance her return by selling a put in addition to the Covered Call. Katie is also OK with purchasing more shares should FB drift lower.
Leisure Suits. “Let me check that oil, Sir”. Spice Girls. Facebook? Will people leave Facebook the same way they dropped Myspace? Facebook needs Instagram for mobile. Will the Instagram acquisition close? Has Facebook hit bottom yet? What do you think?