FB Option trade

Facebook (FB) reported strong earnings last week and the stock is breaking out about it's $133 resistance area. Long term we believe that FB will be a great stock that you could buy and hold, but the current market seems overextended on the post-election rally, and there doesn't seem to be much news that is bringing this market back down. Volatility is very low, and the S&P has been trading sideways to up over the past 2 months. During the last 50 days the S&P is up only 20 points, so even though the rally seems like it's still going strong, it could be fading.

While we'd love to say go long FB, this may not be the best time to take a new long position. If the market pulls back over the next few months, we'd prefer to enter into FB at a lower price.

We are selling the April $115 Puts on FB for $0.55 cents. If the stock drops below $114.45 over the next 72 days we will end up buying the stock at $115, which also represents a strong support level for the stock. If it stays above that price, we keep the premium and the options will expire worthless.