in General

Facebook Stock Options

I started out investing in mutual funds.  It was cheap and long term it looked like the the way to go.  Then I bought some stocks.  I still have stocks and trade in an out (not a lot of trading mind you), but I’ve been giving stock options some thought and doing a bit of research.  A lot of what I’m about to put down here is for my own education and for a place to go back and look in June of 2013 (more on that later).

Facebook LogoSo most of my stock buying has been straight up shares.  For instance on on the 3rd of January I bought some shares of Facebook (symbol: FB).  So far I’m up approximately 14%.  Which is very nice, but then I got to talking to my brother who has done a different type of investing.  He’s done options investing which I have heard of, mainly from the aspect of the risk involved, but we talked a bit about it and I’m intrigued.

I’m not even going to begin to begin to try and explain an option as I”m still not 100% sure exactly what it is, other than 1 call option is worth 100 shares.  Additionally there is a time option which comes into play.  Regardless, here’s what I’m watching and looking at.

I don’t have historical option quotes on Facebook but for the sake of argument here’s what I’m looking at.  I had picked 3 call options for June of 2013 (this is just paper trading and one that looks like I’ll be kicking myself on here shortly!).  One at $35, one at $36 and one at $37.  The respective prices when I started this are below.

  • June 2013 call option at $35.00 as of January 9th 2013 – $2.21 ($221 for 1 option)
  • June 2013 call option at $36.00 as of January 9th 2013 – $1.92 ($192 for 1 option)
  • June 2013 call option at $37.00 as of January 9th 2013 – $1.65 ($165 for 1 option)

As Facebook has been going up, it’s nice to look at. The bigger question is this. What makes you more money?  You don’t really have to do the math to see that if you are just looking at percentages, the options are the way to go.  It’s also cheaper to get into options.  But pure money wise, if you have the money, buying the actual stock is the way to go.  But back to options.  If you buy more than 1 option, I’m looking at 3 to 5, it can begin to equal the amount of 100 shares.

I’ll update this as time goes by to see where the options would have taken me vs the shares that I bought.  For the foreseeable future it will be just shares, but with the possibility of adding options so I can say “Hey I made 100% return on FB”!!!