Top Trade Alert – Oct 27 2022 – META

    META Daily Chart

    Are You Missing Out on the Metaverse? - The New York TimesMark Zuckerberg has bet his company and his fortune on the Metaverse and, so far, it’s sinking the ship but yes, building a new Universe is an expensive project but Facebook (the old company name) already has 3.71 BILLION people logging into this Universe – so they need a new place to visit to keep things fresh.  3.71Bn is the Monthly count and that’s up 4% over last year despite the release from lockdowns and Daily People are also up 4% at 2.93Bn.

    As we expected, the problem with having half the planet as a source of revenues is that half the planet is pretty poor and has weak currency.  While Ad Impressions were up 17%, the Price Per Ad dropped 18%. 

    Overall Revenues were down about $4% to $27.7Bn but META is spending it all, with anticipated expenses this year of about $99Bn.   At this point, building the Metaverse is costing META as much as a major acquisition would have – although without all the nice revenues that usually go with such a thing!  

    We have META in our Long-Term Portfolio and we’re going to stick with them because, if Zuckerberg is right, they will be miles ahead of everyone else in owning the Metaverse and, if he’s wrong, they can always go back to making money off of 4Bn eyeballs in the regular Universe.  

    in the LTP, we now have (after our last roll) 30 of the 2025 $120/160 bull call spreads at $15 ($45,000) and 10 short 2025 $140 put we sold for $30.20, which are now $49.

    In the LTP, the META damage isn’t too terrible – the $120s are now $27 and the $160s are $16 so we’re going to roll the 30 2025 $120s down to the 2025 $90s ($38) for net $11 ($33,000) and pay for that by selling half as many (15) $130 calls for $23 ($34,500).

    Down the road, we’ll roll the short $160s to closer months and work them off and then, hopefully on a move up, we’ll sell more $130s or higher whatevers so the roll will, eventually, be a net plus, which is very nice when your stock drops 25% on you!

    Keep in mind, as soon as we sell 15 of the short $160s, we’re in the clear on margin. At $16, we can roll 5 of them to 10 of the March $120s at $7 but I want to see if META has bounce in it before selling short-term calls that close to the current price.

    As a new position for META, I’d go with:

    Sell 10 META 2025 $100 puts for $24 ($24,000)
    Buy 15 META 2025 $80 calls for $43 ($64,500)
    Sell 10 META 2025 $130 calls for $23 ($23,000)

    That’s net $17,500 on the $75,000 spread that’s $30,000 in the money to start and, as noted above, once META bounces back, we can start selling calls for income. Even if we just sell 5 of the March $120s for $7 ($3,500), that’s nice and we can’t get burned and we just keep rolling them along. The only reason we’d need to roll them is if our $75,000 spread is in the money, right?