This article originally appeared on May 1, 2013 on Real Money. To read more content like this + see inside Jim Cramer's multi-million dollar portfolio for FREE. Click Here NOW.
Facebook (FB) is the second-largest company reporting today, but it will be No. 1 on the media's list. The chart here has coiled up nicely, although I feel that options pricing lines up well with the chart targets. I am looking for $29.50 on the upside and $25 on the downside, which is a $2.00 to $2.50 range. Options are currently anticipating a move around $2.30, so a straddle is not in play for me here. I do believe there is a lot of air below $25 or over $29.50, but there is a lot of risk if using the weekly options.
I have set up three trades, but they will work with each other. First, I went long the June $27 put/$28 call strangle for around $2.75. Then I added the May 10 $28 call/$27 put strangle and short 2x May 3 $30 call/$25 put for around $1.05. The total cost of the trade here is $3.80. Lastly, I want to add some calendar spreads, long the May 17 $30 call/$25 put while shorting the May 3 expiration of the same strike for about $0.36. Overall, the trade is just looking for a move which stays between $24 and $31 here, with Facebook ideally moving toward the $30 or $25 level.
FB data by YCharts
Rovi (ROVI) has benefited from several business announcements and deals, the latest coming with Facebook. It's hard not to like this chart, but I don't, and the reason is that I believe a lot of this anticipated business has now been priced into shares. This stock is all about what will or could be, so I don't believe it has any room for hesitation or misstep here. I'm looking for $20-$21 on the downside. The option volume is thin, but it has mostly been on the call side. I had a May $22.5-$20 put spread filled for $0.65.
ROVI data by YCharts
At the time of publication, Collins was long FB call and put combos and had a put spread on ROVI.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV