$FB Vol Carry

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!

Screen Shot 2016-07-19 at 12.19.30 AMNext 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.

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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%.Screen Shot 2016-07-18 at 11.15.34 PM Screen Shot 2016-07-18 at 11.16.05 PM Screen Shot 2016-07-18 at 11.16.21 PMScreen Shot 2016-07-18 at 11.16.33 PM

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.

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