Is the FB vega too cheap?

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After a weekend of non-activity stocks got back to their old ways and launched this morning without so much as a how do you do.  This latest Euro issue has been around since December apparently and Euro bank stocks were already trading at lower levels.  Either way VIX and the volatility futures are tanking today and the only thing holding up the IV is the balance of earnings.

In our Option Pit Chat, FB came up as a potential earnings play to trade.  Not in the way most traders are used to thinking.  The 120 day IV is at close to 1 year lows.  In and of itself that is not a big deal but with earnings on the way that longer term IV is pretty cheap.  I remember AAPL before the last earnings cycle when we wrote this blog.

I think you can buy the cheap vega to September in FB now and leave some OTM near term options to sell into the earnings cycle, a la AAPL last cycle.  If you want to find out how to do this, tune into the Option Pit Chat Room tomorrow.

The Trade

Start looking at the options in the Sep cycle in FB.

Disclosure: Positions in FB

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