JPMorgan says it's found the perfect trade for worried Facebook investors
Business Insider
Published Mar 21, 2018 09:25AM ET
Updated Mar 21, 2018 11:35AM ET
- Facebook (NASDAQ:FB)'s stock has taken a beating in recent days as a scandal involving a political-research firm has unfolded.
- JPMorgan (NYSE:JPM) has a trade recommendation designed to address both scandal-related uncertainty and Facebook's strong underlying fundamental situation.
As worries mount around Cambridge Analytica , and how much liability the tech giant has.
Still, JPMorgan has been encouraged by Facebook's willingness to present in front of a judicial committee, and remains confident the company's stock can recover from its recent beating — just not for a little while.
That's why JPMorgan's big options recommendation on Facebook is scheduled to expire in May. Not to mention that timing will allow the trade to capture the company's early-May earnings report.
Without further ado, here's the derivatives team's top Facebook trade: buy Facebook $185 calls and simultaneously sell $150 puts, both expiring in May. The trade, known as a risk reversal, will be profitable if the stock sees a big recovery.
"Clarity on the Cambridge issue and FB’s willingness to self-regulate are likely near-term catalysts that may reduce investor fears, stabilize the stock, and position it for a recovery into Q1 results," Shawn Quigg, an equity derivatives strategist at JPMorgan, wrote in a client note.
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Written By: Business Insider
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