Promising Social Media Trades

January 8, 2018 12:58 PM
Technique

“Calls on seven socials,” (below) shows that Lumentum is by far the highest in terms of curve height and volatility implied by the options market. An unusual feature of Lumentum’s call price curve is its lack of any curve. Delta is almost the same value at every strike. With the stock priced at $64.75 on Oct. 30, 2017, at strike price $90, delta is 0.315, while at strike price $65 the delta 0.451. With a straight-line slope for the Lumentum call price curve, delta is safe, but what happens to the other Greeks? 

The height of an option’s price curve at the point where the underlying stock or future’s price equals a strike price is a measure of the options’ market implied volatility for the underlying asset. The curve height percentages for the seven social media stocks are shown below: 

 

Stock        Height of Call
         Option Curve

Lumentum        16.55%

Twitter        13.65%

Weibo        13.33%

Facebook        9.20%

Apple        7.92%

Alphabet Class A, GOOGL    7.48%

Match Group        6.44%

Page 2 of 3
About the Author

Paul Cretien is a financial analyst and financial case writer. You can reach Paul at Cretien619@aol.com.