My Top META Trade After Earnings

With earnings behind us for Meta Platforms META, the stock’s resistance now sits near $700 while support is down near $560.The chart is telling me that a rotation into that support before the next move up could be ahead. Here’s how I’d use options to trade that move. The best way to do this is with a put butterfly on META into the end of the summer. The long put butterfly is a combination of a long put spread and a short put spread. The overall position is ‘technically neutral.' But if we trade into support and remove the trade near the middle strike, we are essentially taking a stance that the chart should fade to support before its next rally. With META’s relative resistance zone sitting at around $700 and support near $560, the option chains are pricing in a move that is $111 from the current price. With this trade, we are well inside that range to collect profit: Buy to open 1 META 19 Sept 590 puts Sell to open 2 META 19 Sept 560 puts Buy to open 1 META 19 Sept 530 puts The cost of the trade as of this writing is $2.15, which represents the total risk for the position. The breakeven price of the stock at expiration on this trade is calculated by subtracting the debit paid less the $590 strike. $590 + $2.15 = $592.15. The maximum return is the distance between the $590 and $560 strikes less the cost of the debit = $30 – $2.15 = $27.85 (or $2,785).There are two possible ways to leave this trade: Hold the option until the strike tests $560 and leave the trade with whatever profits sit in the position. Set an alert for your max loss – if the option erodes to less than 50% of its price. Sell the position if your risk thresholds are breached. Wall Street Veteran Posts Every Trade LiveNo after-the-fact claims. Matt Maley's Inner Circle members see every entry, exit, and adjustment in real time with exact prices. Last week, they watched multiple big winners unfold from start to finish. Join Matt's Inner Circle HERE – 7 Days FreeEditorial content from our expert contributors is intended to be information for the general public and not individualized investment advice. Editors/contributors are presenting their individual opinions and strategies, which are neither expressly nor impliedly approved or endorsed by Benzinga.Photo: Shutterstock