Tuesday, July 10, 2012

Closing Facebook Position

As discussed here, CCI had sold the Facebook (FB) July $25/27 - $33/35 iron condor for $1.00/contract.  This was in essence a 50/50 bet that the noise over Facebook's IPO would die down and the stock would settle somewhere in the $6 range between $27 and $33 in July.  That seems to have happened!

With FB trading around $31.50 today, CCI covered the position for $.25/contract.  That is a $.75/contract gain or a 75% return on the $1.00/contract of risk capital.  While that seems impressive, these type of trades have either a big gain or loss.  Big gains are better...lol

At a more macro level, this trade and a few other FB trades have now generated enough profits to more than  cover the loss in the small amount of shares I was allocated at the IPO price of $38. So we will take our modest overall profit in Facebook and move to the sidelines on this stock for awhile. 

Going forward, I suspect that even "if" FB posts good earnings results this stock will have a lot of trouble getting to $40 for quite awhile. This is because I suspect many early buyers will be looking to selling if/when they get back to near break even.  "If"  the stock were to move up to about $36, it might be a good candidate to sell something like a $37-$39 call spread.  I've set an alert if it goes over $36 to evaluate this strategy at that time.

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