Another First for Facebook: Options

Focus: OPTIONS

Mike Scanlin Image Mike Scanlin CEO, BornToSell.com

This week marks another first for the social networking giant as Facebook (FB) options make their debut, and there are a few different strategies traders and investors can put to use, explains Mike Scanlin of BornToSell.com.

Option exchanges have minimum requirements that must be met before new issues like Facebook (FB), or any stock, can trade put and call options:

  1. Share price above $3 for five business days
  2. Number of shareholders greater than 2,000
  3. Public float in excess of seven million shares
  4. 12-month trading volume greater than 2.4 million shares

Facebook has met all of these requirements and will have call and put options available on Tuesday, May 29.

Initial strikes on FB will be 16, 19, 22, 25, 28, 31, 34, 37F, 40, 43, 46, and 49, and the options will trade in nickel increments.

Facebook Option Strategies for Various Investor Situations

There are different strategies for investors in different situations. Let’s start with the most vested to the least:

Employees and Early Facebook Investors

You probably have a share cost less than the current market price of $31.91. Maybe you don’t want to sell your shares (or can’t, because of the post-IPO lockup), but you’d like to generate some income from your shares.