1:30pm (EST)

Facebook (FB, $51.11, up $2.10) shares were all over the map in after-hours trading on Wednesday after the company reported earnings.  Shares spiked over 15% and were pushing $57 before a drop near $45.  By 8pm (EST) the stock ended 2 cents lower.

Earnings came in at 25 cents a share on revenue of $2.02 billion versus estimates of 19 cents a share on sales of $1.91 billion.  The company said Daily users were averaging 728 million, for September, and 1.2 billion Monthly active users, a jump of 18% year-over-year.

The real growth is in Mobile Monthly users as there were 874 million Facebooker’s as of September, an increase of 45% year-over-year.

Shares of Facebook opened this morning’s session at $47.36 and traded to a low of $46.50 before rebounding.  The stock is back above $50 as we head into the second half of trading and the option pits have been active.

We were thisclose to buying call options at the open for a possible one-day trade as we figured a rebound would come once Wall Street recognized their mobile growth.

We profiled a Netflix (NFLX, $325.41, up $7.27) trade last week that took advantage of the opening drop and pop on some put options that would have returned 775%.

The setup for Facebook would have been a little different as we were looking to buy call options on the morning weakness and riding them out for a day or two for a possible retest to $50.

As you can see from the Yahoo Finance quote below, the Facebook November 48 calls (FB131116C00048000, $3.60, down $0.20) opened at $1.61 and reached a low of $1.21.  If we had purchased these calls shortly after the open our price would have been below $1.60 and at current levels they are a double, or up over 100%, for 4 hours of work.

 

We should have profiled this trade on our Watch List put we know it is hard to buy call options on a stock that tanks at the open because there could be further weakness.

With momentum stocks, these types of trades are common after earnings and you have to be careful trading the setups but we wanted to bring you another example on how you can make 100%-775% returns by playing earnings.

If you missed our Netflix example on how the put options made 775%, check out last Tuesday’s midday update.

As we head to press, the Dow is down 6 points t 15,612 while the S&P 500 is higher by a points to 1,764.  The Nasdaq is higher by 7 points to 3,937.

We have a lot to cover in our Members Area so let’s get on it.

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