Content is King—Another Cheap Straddle

07/27/2015 8:00 am EST

Focus: OPTIONS

Mark Sebastian

Founder, OptionPit.com

Since content delivery is blowing the socks off the market, so far, this earnings season, option trader Mark Sebastian, of OptionPit.com, thinks this social media leader is going to knock the socks off earnings and will examine calls or the straddle as we approach the announcement.

So far this earnings cycle we have seen big wins in tech out of GOOG, NFLX, and no AMZN.  Flops have come from AAPL, IBM, and MSFT. Take a look at the pricing of AMZN from last Wednesday (was up about double the straddle price).

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So, what is the trend? Content delivery is blowing the socks off the market with YouTube,  Prime, and NFLX Streaming and device markers are in the dumps right now.  This could be a trend for a while.

The Lesson:

Look for the trade that is developing in earnings, the trend may be your friend.  Make sure that one does not try to fit a square peg in a round circle.  Look at where the money is being made.

The Trade:

I think FB is going to knock the socks off earnings and will examinecalls or the straddle as we approach earnings, there might be value there if—yet again—the street underprices earnings premium.

By Mark Sebastian, Blogger and Contributor, OptionPit.com

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