Now that I’m settled into a new job in a new city and my gold short has been a total flop, let’s try to make some money!
Next Wednesday, $FB reports. Today, we saw beautiful price action against an awful tape. What’s more, IV actually ticked down! Given post-Brexit’s face-ripping rally, options markets appear entirely lacking of an appetite for incremental risk.
At Monday’s close, weekly $FB options markets were pricing in a 3.05% implied move by EOM. A quick lookback at $FB’s prior four earnings reports suggests we ride the vol wave higher through Friday and target a rough doubling in $FB volatility to ~7%.
This morning I opened EOM $FB 121 Calls paying $2.42 each. I intend to hold these through midday Friday to capture a ramp in volatility. I’m bearish on $FB’s earnings report, but will re-evaluate the mechanism through which to express the view as we see how markets evolve over the next week.