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Bullish in $FB? Trade Idea

Lot's of conversation surrounding $FB (Meta) and it's significant drop. For context, checkout the chart below:

As we see, FB has dropped from $384.33 (1Sep21) to $185.82 (14Mar22). This is a significant drop and demands respect of the trader. It's VITAL to conduct comprehensive due diligence based on your trading objectives and dispositions. This post is NOT that, nor is it an endorsement of FB here. Rather, I'm going to share a prospective long-term long trade concept that I'm looking at, pending an appealing entry point - which doesn't exist yet. I primarily demand to see some sort of support and upward rotation before any sort of long trade. Higher lows, higher highs, MA's reverting back to upward dispositions with S > 50d MA, volume thriving on upward movement and lower volume during pullbacks, strong earnings reports, etc.

That out of the way, here's the trade. I'm looking at and will continue to monitor until an entry presents itself:

  • Allocation: $50,000

  • Initial outlay: up to $30,000

  • Based on specific entry conditions, I will establish my loss targets prior to actual entry. I likely will favor a 8-10% stop on the longs

  • Initial scaling analysis trigger will occur at a minimum of +/- 5% movement. Follow on scaling will be revised as necessary, likely 5% still.

  • Also based on specific entry conditions, I will establish profit targets prior to actual entry. Price momentum will be an important inclusion, particularly if we're rallying out of a significant decline (as we are now).

  • Prospective Initial Trade (based on today's conditions, 14Mar22)

    • T1: BTO (3) 19Jan24 130C @ 77.30 (Total Debit: $23,191.50)

    • T2: STO (2) 14Apr22 190C @ 8.80 (Total Credit: $1,552.90)

    • This represents a 6.7% ROIC in 31 days, more importantly, without capping the upside. Below is the prospective PnL chart:

A few notes on the trade:

  • This is a lower ROIC diagonal than what I usually target (typically prefer >10% ROIC in < 40 DTE). However, the upside potential behind a rally is significant. In this case, I'd be prioritizing upside potential against up front return.

  • This is also why I'd go so far out in time on the long calls. This again is subject to change based on actual entry conditions.

  • I like to monitor trades like this in products that I like, although they may not be suitable for entry at this exact moment. So what I do is set a few alerts to monitor the underlying and receive a heads up. For example, if I know I want S > 50d MA, I may set an alert for when S > 20d MA and assess the underlying performance and momentum. I use these intermittent alerts to keep the product on my radar and potentially assess as slightly early entry based on performance.

Just some thoughts on $FB. Not right for entry yet (for me) but on my watch list.

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