Option Trade 
Facebook Inc (NASDAQ:FB) Calls 
Tuesday, 10th May, 2016

** OPTION TRADE: Buy the FB Sep 2016 120.000 call at approximately $7.80. Place a pre-determined sell at $15.00.

Note: No protective stop losses added -- but if you wish to do so make it $3.10.

by Ian Harvey

May 10, 2016

The technology sector has had a dismal showing this earnings season, taking the Nasdaq Composite Index into a full-fledged downtrend. Facebook Inc (NASDAQ: FB), which is engaged in building products to create utility for users, developers, and advertisers, however, bucked the trend and ripped higher on its announcement, tagging a new all-time high in the process. Of all the tech firms that just reported earnings, Facebook Inc was the only one to exceed market expectations. The company showed stellar growth in the last year.

The company pulled in $5.38 billion in revenue, reflecting a 52% increase from the same quarter last year. And that’s not even the half of it.

Facebook’s margins have gotten juicier than ever before. The company’s profit skyrocketed 115% year-over-year, from $993.0 million to $2.0 billion.

FB stock’s trend is flashing bullish signals galore. At approximately $120, FB is perched above all major moving averages. Blue skies loom above, and Facebook boasts the bevy of benefits that come when a stock reaches an all-time high.

Chief among them is the absence of any overhead supply. 100% of shareholders hold profitable positions and anyone unfortunate enough to be short the stock is sitting on an increasingly painful position.

The chart says FB wants to go higher.

Since its earnings gap, Facebook has spent its days consolidating in bullish fashion. Now that the gap has been digested, higher prices are beckoning.

Facebook, Inc., being a growth stock is an exciting pick in the market, being a high-flyer can produce big gains for the investor – and is well-positioned for future earnings growth.

FB saw EPS growth of 11.2% last year, and is looking great for this year too.

In fact, the current growth estimate for this year calls for earnings-per-share growth of 88.2% Furthermore; the long-term growth rate is currently an impressive 31.6%.

And if this wasn't enough, the stock has actually seen estimates rise over the past month for the current fiscal year by about 16.7%.

It was a dream quarter for CEO Mark Zuckerberg.

A lot of his earlier bets paid off. Zuckerberg poured a lot of resources into building Facebook apps for smartphones. He saw mobile as the ultimate operating platforms, a guess that proved eerily prescient.

Customers are spending more time on mobile devices than desktops and laptops. A report found that more than half of all e-mails were opened on smartphones, which goes to show how integral mobile devices are to consumers.

Facebook took advantage of this trend by spotting it early, then designing apps that would keep users satisfied. The company’s mobile monthly active users were 1.51 billion at the end of March. That’s a sizeable portion of the planet.

The company used this success on mobile to attract advertisers. In the previous quarter, mobile advertising revenue made up 82% of the firm’s total ad revenue.

Facebook Inc was upgraded by Vetr from a “sell” rating to a “hold” rating in a research report issued last Thursday.

Also, several other equities research analysts have recently commented on the company.

• Axiom Securities upped their price objective on Facebook from $145.00 to $150.00 and gave the company a “buy” rating in a research note on Monday, April 4th.

• JPMorgan Chase & Co. restated an “overweight” rating and issued a $136.00 price objective on shares of Facebook in a research note on Tuesday, March 8th.

• Piper Jaffray reiterated an “overweight” rating and set a $170.00 target price (up previously from $155.00) on shares of Facebook in a research note on Wednesday, January 27th.

• Sanford C. Bernstein set a $150.00 target price on Facebook and gave the stock a “neutral” rating in a research note on Thursday, January 28th.

• Finally, Morgan Stanley set a $140.00 target price on Facebook and gave the stock a “buy” rating in a research note on Friday, April 8th.

One analyst has rated the stock with a sell rating, four have assigned a hold rating, forty-nine have given a buy rating and two have given a strong buy rating to the company’s stock. Facebook presently has a consensus rating of “Buy” and a consensus target price of $137.46.

Harvey’s Options Volatility Indicator

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

** OPTION TRADE: Buy the FB Sep 2016 120.000 call at approximately $7.80. Place a pre-determined sell at $15.00.

Note: No protective stop losses added -- but if you wish to do so make it $3.10.

”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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