A Facebook Strangle Looks Inviting

The implied volatility on Facebook (FB) is simply too cheap here. The IV cratered into the 31% range today. This is the lowest the IV has traded on options since Facebook came public. In fact, until this post-earnings-report period, Facebook had not seen an IV level below the 40% area. To me, this is an opportunity to use longer-dated straddles or strangles.

My preference here is to go with the May or June $28 puts/$29 call strangle. I bought the June strangles this morning for $5.14 and $5.15 but received only a small fill. I am looking to add some of the May strangles for under $4.60 as well. The time decay on these strangles is only about $0.01 to $0.02 per day, but the benefit from an increase in volatility would offset that time decay easily in the near term....323 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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