Cherry bomb

META Options Signal Bounce Ahead of Earnings

By:Tom Preston

META’s OTM calls are trading over equidistant OTM puts, indicating that the market sees risk to the upside providing a bullish strategy opportunity

  • Trump calls META an "enemy of the people."
  • META is profitable and it isn't going anywhere.
  • META is a viable candidate for short premium trades.

In the world of social media, TikTok and Meta Platforms (META) are the most popular punching bags for politicians.

Whether it’s claims of toxic content or disinformation, everyone can find something to complain about. Of the two, META is the one we can trade. It sold off after hitting an all-time high last Friday after former president Donald Trump claimed it was an enemy of the people. Whatever.

The company makes money and isn’t going anywhere. META’s out of the money (OTM) calls are trading over equidistant OTM puts, indicating that the market sees risk to the upside. All of that might be enough for a trader to consider a bullish strategy in it.

Volatility climbs

META’s implied volatility (IV) has been climbing on the stock’s weakness and the impending earnings in late April. Meta’s 34% overall IV and 30% IV rank make its options good candidates for short premium trades.

If you think META might continue to rally in the next few weeks and don’t want to take risk through earnings, the short put vertical that’s long the 475 put and short the 480 put in the April expiration with 37 DTE is a bullish strategy that collects a credit 1/3 the width of its strikes, has a 75% prob of making 50% of its max potential profit before expiry, and that generates $1.02 of positive daily theta.  

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Tom Preston, tastylive chief market strategist, is responsible for the brokerage’s trading strategy, client-facing trading software and futures trading products. He contributes to Luckbox magazine and writes tastylive's Cherry Bomb newsletter. He's been trading options since 1992.

For live daily programming, market news and commentary, visit tastylive or the YouTube channels tastylive (for options traders), and tastyliveTrending for stocks, futures, forex & macro.

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