Liking a Facebook Options Play

I've been messing around with the Facebook (FB) options and trying to outline a bullish trade that offers a decent risk/reward scenario that would be similar to buying the stock, but would still have some limits as far as risk and reward. I have to say it hasn't been easy so far, but I've mapped out one trade, from a bullish perspective, that I like. Of course, I initiated a bullish trade earlier in the month, which I may take off the table early. But this is the long trade that I am using to replace long stock and my current LEAP position. Given the size of the LEAP position, it will probably take me a day or two to unwind and rotate this over.

There is no denying the strong run FB shares have had. There is the "event" on Tuesday, the technical breakout, and, of course, earnings coming on Jan. 30. Expectations feel very high into earnings this go round given the stock's performance, so I want to allow myself upside, but define my risk. It is important to note this is an adjustment to long stock and long LEAPs, so it is not an entirely new position. For starters after selling the stock, I am then going to buy a February skip-strike call play here consisting of long 1x February $28 calls, short 2x February $37 calls and long 1x February $39 calls for around $3.70. The price has been jumping between $3.60 and $3.75 today. Although I gave consideration to the $35 strike, I am using the $37 strike on the short side. This is because no matter how good FB's report is, I just don't see it being able to clear the $38 offering price without a lot of resistance on the first attempt. Also, given the stock's run, I anticipate there will be a profit-taking fade if there is an additional pop to the upside....284 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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