Long term trade on Facebook

The massive volatility and drop in equity markets today presents another opportunity to position into Facebook for a longer term trade. Shares have been trading at the bottom range of their uptrend recently, and today has dropped $2.50 to $112.57. Facebook has had 3 earnings upside surprises in a row and we feel that the company is executing on all cylinders. We can overcome short-term volatility with a longer-term trade and capture a few earnings cycles as well.

The ideal trade here is something that is relatively cash neutral and gives us significant upside. We are buying the June 2017 $120 Calls for $10.50, and selling the same expiration $85 Puts for $4.00 and also the same strike $135 Calls for $5.35 for a net trade cost of $1.15. We will benefit on this trade if FB moves higher and can yield a max profit of $1500 on our investment of $115, or a 13x return in the next 357 days.