Option Trade 
Facebook Inc (NASDAQ:FB) Calls 
Friday, September 25, 2015

**OPTION TRADE: Buy the FB Dec 2015 105.000 call (FB151218C00105000) at approximately $1.95. Place a pre-determined sell at $4.00.

Note: No protective stop losses added as yet -- but if you wish to do so make it $0.75.

by Ian Harvey

September 25, 2015


Facebook Inc (NASDAQ: FB), which is engaged in building products to create utility for users, developers, and advertisers, has been increasing their presence of late – the latest being at the second-annual Oculus Connect conference, which is underway in Los Angeles, and the tech world is buzzing about the new VR (virtual reality) gear Oculus -- which was bought by Facebook Inc last year for $2 billion -- and Samsung Electronics unveiled, just in time for the holiday season.

Facebook Inc stock is up 17.6% over the past year, currently trading around $94.41 per share.

At half the price of its last mobile VR headset, the new $99 Oculus-made Samsung Gear VR is cheap enough to unlock virtual reality for the mainstream. Revealed today at the Oculus Connect conference, it works with the whole 2015 line of Samsung Smartphones including the Note 5, S6, S6 Edge, and S6 Edge+. It will ship in November in time for Black Friday. Compared to the $199 previous Gear VRs that only worked with fewer phones, this headset will be a lot more accessible.

Analysts are decidedly bullish on Facebook Inc, with 27 out of 29 brokerages covering the shares maintaining a "buy" or "strong buy" recommendation, with not a single "sell" to be found.

Plus, the average 12-month price target of $112.50 represents expected upside of 19% to FB's current price.

Now key acquisitions suggest FB’s stock price climb – and revenue rise – is still far from over.

Analysts feared that fleeing younger users would hurt the Facebook Inc. stock price, but this has been an unfounded fear – and by looking past the actual platform it’s now much bigger than monthly active users and new signups to CEO Mark Zuckerberg’s dorm-room creation.

Zuckerberg is proving his ability to anticipate new avenues for monetization and growth.

There are several reasons to be optimistic about FaceBook:-

Acquisition of sites –

• WhatsApp is a platform that allows for mobile messages across different phones without charging an SMS fee.
From April to September, WhatsApp saw an 11%, or 100 million, increase in new monthly active users (MAUs). As Money Morning highlighted Sept. 14, WhatsApp now reports a total of 900 million monthly active users.

• Instagram operates as a social media platform that only allows you to upload photos through a mobile phone or tablet. It has 400 million MAUs, according to its website on Sept. 24. These MAUs are key because they will be the targets of Facebook’s big revenue driver: mobile ads.

Revenue from the mobile market –

Mobile ads accounted for 76% of Facebook’s $3.8 billion second-quarter advertising revenue in 2015. Mobile advertising revenue was also up 43% year over year for FB in Q2.
EMarketer, an independent research company, estimated that Instagram will collect $600 million in ad sales in 2015. By 2017, revenue could reach into the billions.
WhatsApp will eventually serve as another stream of mobile ad revenue, which Zuckerberg stated could be monetized in several ways in the last quarterly earnings call – but did not give specifics.

Growing Presence in Emerging Markets –

According to digital marketing tips and stat provider DMR, Facebook only has an 8.2% penetration in India, but boasts 102 million users there. These numbers indicate that FB can still extend its reach into emerging markets.
Facebook is blocked in China, but Zuckerberg has gained access to the millennials and the rising Chinese middle class through Instagram and WhatsApp.
Facebook received 51% of its global ad sales in the first quarter of 2015 from overseas markets.
Foreign companies are still willing to pay for ad space, even in times of slowing economic growth and turmoil.

Harvey’s Options Volatility Indicator


Consensus estimates project revenue for Facebook to grow by 36% at the end of December 2016, with a low estimate of $21.55 billion in revenue and a high of $25.39 billion.

Therefore, based on the facts above, and Harvey’s Options Volatility Indicator, the following option trade is recommended…..

**OPTION TRADE: Buy the FB Dec 2015 105.000 call (FB151218C00105000) at approximately $1.95. Place a pre-determined sell at $4.00.

Note: No protective stop losses added as yet -- but if you wish to do so make it $0.75.

”Success is simple. Do what's right, the right way, at the right time.”

Option Tip for your Success!
Options traders are not successful because they win.
Options traders win because they are successful.

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