Facebook_logoTuesday marked the historic release of Facebook options

Facebook opened Tuesday with record-setting volume as small investors and professionals alike pushed activity to more than 312,000 contracts.

The day also marked one of the best opportunities for options traders.

Why?

Because Facebook fits the following criteria:

  • The options are highly liquid (tight bid/ask spread)
  • The stock is volatile
  • The implied volatility is high

Basically, whenever you can find a highly liquid options market in a $30 stock with a high implied volatility (inflated options prices) you have the ultimate trading vehicle. These types of scenarios don’t last long as a reversion back to the mean typically occurs.

But, in the case of Facebook, the stock is in its infancy so the market hasn’t figured out what the expected move or true implied volatility is in the social media giant. Until the market can figure that out those details, we should see inflated options premium which means wonderful opportunities for selling options in Facebook using credit spreads.

2012-06-06_Facebook.credit.spreads1

If you wish to see how I would trade the current situation in Facebook, sign up for my free webinar, “Creating your Own Odds: The High-Probability Strategy for Consistent and Easy Income.

If you have any questions or comments, please feel free to e-mail me at [email protected].

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