Dan Passarelli, CEO - Market Taker Mentoring

Hey, Dan Passarelli here. I said at the beginning of this year that this is going to be. The year of the straddle. And man has it shaped up that way. And guess what?

Straddles are still in play. And I want to share with you one that I did today. So in our group coaching class, I was looking at Facebook, now called Meta platforms, of course, and I was looking at the chart here. Let's pull up the chart first.

Let's see, this is from, yeah a six month chart. And let's pull up a year chart. Just to give a little bit more context. So two earnings ago, Meta just got annihilated. They went from about 320 something down to 240 something. And it's kind of traded in a little bit of a range since then. A little bit of some lower highs. But we've definitely got a level of support that was formed here. A double bottom. Meta has been changing their strategy, of course, moving a little bit away from the ads that there's been a lot of litigious activity around. Personal data stuff. To the Metaverse and some of that. And all the things that can be done with that.

It's pretty interesting, but it's a big transitional period for them. So that's part of one of the reasons why I think we've been stuck in this range.

But at some point we kind of have to break out. And if you look and let's go back to the six month chart here. If you look at where historical volatility is, it's down fairly low. If we erase these mesas, it's down kind of in where it's been for the past five months or something like that. And the implied volatility is trading really decidedly lower than that. If we consider the historical volatility, let's just rounded down to 51. When we go a month out, we can buy it like a 41 volatility.

That's a very very low volatility. And the stock is definitely moving at more than a 41 vol. I mean, that's lower than the historical volatility has been for the past five months overall.

So that being said, we're getting a really good value from a volatility standpoint on buying options in Meta. And further. If we just look at how much one could pay, I believe I paid 21 point $45 for the 200 straddle earlier today.

I mean, look, we've been above that point just a few weeks ago and below that point just two weeks ago. So this ends up being a really nice set up. This is something that I talked about at our retreat. I did one section of my Greeks and modeling class all on this, and that one particular section I did talk about Straddles. And these are the two ways we always need to look at it from a volatility standpoint. And then just from a good old traditional break even standpoint, this is a trade that I really ended up liking today. I hope that helps.

This Is Dan Passarelli Trade Smart.