The Market Does not Like Facebook $FB, $SPX

The Market Does not Like Facebook  $FB, $SPX

We don’t see a $500 billion company lose 20% of its value in a day often but today was one such day. The market hated FB after Debbie Downer CFO issued sobering revenue forecasts.  With 2 billion users FB pretty much has everyone with a phone already so they are going to have to figure a way to wring more bucks out of the folks they have.  They made the move to mobile well enough when $FB was a $19 stock so I am sure they can figure this out.

What we don’t see very often either is a big jump in vol the day after earnings.  $FB IV shot up since no one really expected a 20% move today and were unsure how the day would go.  Normally when IV does something like that the liquidity providers are expecting substantial movement after earnings too.  $FB only moved about $5 after the gap so one can see from the chart the IV crept lower all day.  You can see Mark’s webinar on trading earnings here and that would help explain that.

 

Charts by LiveVol

Normally this bulge in IV is short lived and can be bullish.    There are ways to trade a bullish posture but also benefit from the collapse in IV and we covered them in the Mark and Andrew Show in the Option Pit Chat Room this morning.  I think there is more room for FB to come back and IV to drop.

If you get stuck in a Terrible Trade, learn how to fix it here this Sunday.

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