Facebook broke its main daily trend of support and is trading below its 10-day moving average.
Stochastics, RSI and MACD are bearish.
We're buying the Sep16 125/120 Put Spread to play a retracement on the 38.20%-50% area of retracement of the last bullish wave 108.23/128.33 respectively 120.65/118.28.
Management and risk descriptionEntry
: Buy FB Sep16 125/120 Put Spread at $2.18
→ Buy FB Sep16 125 Put at $3.68
& Sell FB Sep16 120 Put at $1.50
Maximum Profit at expiry is limited
Maximum profit at expiry achieved when underlying price =< short strike price
At expiry maximum profit = Long Strike Price minus Short Strike Price minus Premium Paid
= 125 – 120 - 2.18
= 2.82 or $282 per Put Spread
Return on investment if the market closes at 120 or below at expiry
= Profit/Premium X 100
= $2.82/$2.18 X 100
Maximum loss is limited to premium paid
Maximum loss is $2.18 or $218 per Put Spread
Breakeven point at expiry
Long Strike – Premium Paid
$125 - $2.18 = $122.82
Target: 120 or below
Time horizon: 31 days
— Edited by Clare MacCarthy
Non-independent investment research disclaimer applies. Read more