Since Sep 25th this year, we’ve been bullish on $META targeting $600 as a major upside strike when the stock was below $565. We took this trade for the Dec op-ex which is Dec 20th buying the $590 calls, selling 2x the $600 calls and buying the $605 calls.
Live Option Trade Benzinga Option School
As of today, $META is currently sitting at $605 so hitting our max profit target, and then some. While shares have been producing above average volume, options have been quite strong and decisive with dominantly bullish option flows on the day.
We’re going to dive into our PFP system (Positioning, Flows and Price Action) to see if META has more upside, and if so, where to?
Options Positioning in $META
Looking at the options positioning in $META, we have a huge combo strike at $600 acting as the TGS (top gamma strike) and TCS (top call strike). $600 is a massive strike between now and the Dec op-ex standing out above all the others, thus clearly bulls have been targeting this strike for quite some time, thus making it an obvious upside target. It is precisely this reason we chose the $600 as our big upside target.
But the question remains – does it have more upside potential?
Looking at the current positioning (before the day started) the call gamma at $605 is literally 1/6th of the call gamma at $600, so this is not promising for grabbing more upside.
But….when I look at the options volume in TOS (think or swim) for strikes above $600, $605 and $610 are posting the largest volumes with 15K and 25K respectively for this Friday’s op-ex.
Looking even further down the road at the next op-ex (Dec 13th) $610 has the largest options volume coming in at 6.3K contracts beating out any other strike for the expiry.
And peeking at the Dec op-ex (20th) option chain below, as you can see below, the $610 strike has 3.7K contracts which is 2nd to the $600 contracts.
Option Chain (TOS) Dec 20th $META
Assuming a decent portion of these contracts (volume) get converted to positioning (open interest) we can see there is fuel (i.e. interest) in pushing to the $605/$610 strikes between now and the Dec op-ex.
Thus from a positioning standpoint, I see more upside available to $610.
Price Action in $META
In alignment with the positioning, looking at the price action in 5 minute chart below, we can see the dominant moves over the last three sessions have been impulsive moves to the upside while only producing mildly corrective moves as pullbacks.
This tells me the price action is noting a continual imbalance to the buy side over several sessions, thus suggesting the price action is supportive of staying bullish.
Honestly, it’s a pretty straight forward tale here in the price action.
I suspect with $600 being a large combo strike that pullbacks will likely find their way to $600, which should attract some new buying interest.
Option Flows in $META
Overall option flows in $META today have been strong producing over +300M in notional deltas with strong call buying 45mins after the market open and then right at the EU close. Put buying has been de minimus which means bears have little interest in buying downside protection/bearish plays from here.
Thus, the option flows have been quite bullish on the day. Not record breaking, but strong and solid, thus we favor buying dips.
How We’re Trading $META
Besides the current trade we have that’s already in a handsome profit, we’ll look to manage that position, and then possibly add another position for the Jan op-ex with the $620 and $650 strikes standing out to us. Beyond the Jan op-ex, we’re not sure how we want to trade $META as we’re unsure how the incoming Trump admin will impact the economy and market, particularly for $META, thus we’ll remain bullish till the Jan op-ex, but then get a feel for things before taking new positions.
For the Jan op-ex, we like long calls, long call spreads or long call BWB’s as suitable structures to trade. We’ll share our live trade in real time with our members of the Benzinga Option School or Trading Waves, which you can join now for the Black Friday special, hence we hope to see you there soon.
