stocks
Meta shares look 'iffy' into earnings. How to trade it
Meta heads into earnings Wednesday after the bell with the fundamentals case largely intact. But the technicals are a bit shaky.
TL;DR
- Meta's fundamentals show strong top-line growth driven by ad pricing improvements and targeting.
- The options market implies a significant price movement for Meta following earnings.
- Recent call buying activity suggests interest in upside potential.
- Technical indicators for Meta are described as 'iffy,' with the stock lingering around its 150-day moving average.
- Historically, buying Meta stock into earnings and holding for two weeks has resulted in an average return of 0.92%.
- Buying at-the-money call options has historically led to losses due to the need for substantial stock price appreciation.
- A call spread risk reversal strategy is suggested to improve the win rate, reduce downside exposure, and cap upside gains.
- This strategy involves selling puts and calls to finance the purchase of at-the-money calls, offering better worst-case loss scenarios than buying the stock directly.