Facebook Inc (NASDAQ:FB) has hit the all-time high back in December, when the stock reached around $81.5. But the stock started dropping since the peak and is currently trading at around $74.5, dropped nearly 9% since the peak. Carter Worth compared the peak and break in trend of Facebook Inc (NASDAQ:FB) stock with other big names which faced similar trend like, Google Inc (NADSAQ:GOOGL), Priceline Group Inc (NASDAQ:PCLN), Tesla Motors Inc (NASDAQ:TSLA) and Netflix, Inc. (NASDAQ:NFLX). Michael Khouw shared his options play to gain profits from Facebook Inc (NASDAQ:FB) stock in current scenario at low risk on CNBC.
Worrth pointed out that Google Inc (NASDAQ:GOOGL) stock had dropped around 18% from peak and 11% from trendline since its peak in 2013 before it started gaining again. Priceline Group Inc (NASDAQ:PCLN) also had similar trend like Google in 2013, when the stock had dropped 28% from peak and 17% from trendline before starting to recover again. Tesla Motors Inc (NASDAQ:TSLA) and Netflix, Inc. (NASDAQ:NFLX) also faced similar trend in 2014, when the stock dropped 33% and 34% since peak respectively. On an average all these momentum stocks dropped 28% since peak and 17% from the trendline. But, Facebook Inc (NASDAQ:FB) has dropped only 9% since its peak and 2% from the trendline so far.
Worth pointed out that if Facebook Inc (NASDAQ:FB) stock also follows the trend of these momentum stocks on average, Facebook stock will go as low as $63 – $65 per share. He recommends that it is the right time to sell the Facebook Inc (NASDAQ:FB) stock.
Khouw accepted that it would be very tough for him to short Facebook Inc (NASDAQ:FB) stock at the moment. He feels that the stock is trading at its mean valuation and can demonstrate real growth. He pointed that they have achieved his expectations repeatedly in the past.
“[…] The notion of taking a naked control position in Facebook right now seems a little bit challenging. I actually wouldn’t even because, […] going into the earnings report on the 28th. I don’t really look at buying options as my way to make a bearing bet on either. So instead what I am looking at is why don’t we take advantage of the fact that market seems to be under a little stress right here. […] Options premium are higher. So just looking at selling a call spread specifically February $77.5 – $82.5 call spread. You can sell the $77.5 @ $2.45 and buy the $82.5 for a dollar. So you are going to collect $1.45. Now one quick point about this trade, three things can happen. Two of them are good. So if the stock goes down you are going to win, if the stock stays here, even if it goes up slightly you are going to collect that premium. Its only if the stock really rockets higher that you are going to end up losing and that’s the reason we selling a call spread,” Khouw shared his options play on Facebook Inc (NASDAQ:FB) stock.
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