For those of you who have been following our FB earnings protection trade, the moment of truth is upon us, with the company issuing its report after the close tomorrow (1/30).
Going back to last Friday (1/25), those who had entered our suggested trade were faced with a decision. With FB stock traing around $31.50, the expiring short weekly Jan 30 call was in-the money and a decision had to be made to either (i) allow your stock to be called away for $30 per share plus the $.70 per share collected from selling the weekly Jan 30 call and weekly Jan 26 put. You could still continue holding the Jan 27 put that expires this week in anticipation of a stock price pullback following the earnings report, or (ii) buy back the in-the-money Jan 30 call for a net cost of $0.80 per share in order to hold the stock through the earnings report. Again, the Jan 27 put would be in place to insure a minimum sale price of $27 per share through this Friday (2/1). Either decision would leave you well placed in the event of an earnings disaster such as that recently observed when Apple Inc (NASDAQ:AAPL) issued a disappointing report.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.