Specifics on the FB trade
I’m buying FB more aggressively than usual for a new position. I’ll explain in detail in a follow-up post with the clearest fundamental analysis for Facebook that you’ll find on Wall Street but as for the opening trades in FB for me, I’m starting with some common stock here at $26 and I’m also buying some long-dated call options, with strike prices at $28 to $30 a share and with expirations out into January of 2013. I’m also eyeing the January 2014 call options with strike prices starting at $30 on up.
To reiterate what a call option means — buying 1 call FB $30 January 2013 option gives me the right to buy 100 shares of Facebook on the third Friday of January of next year for $30 a share no matter where FB is trading at that time. So if the stock is up above $30 a share, say at $40 a share, then the call would be worth at least $10. That would mean that a $300 investment in an FB call option would be worth $1000 if FB is at $40 by the third week of January. And if the stock goes up a bunch before then, obviously, I could sell the call option to someone else for big gains before next January if I wanted too.
And of course, as with any options trade, I could lose every penny of my capital if the stock is below the strike price ($30 in this case) when the expiration date comes.
Just buying some BRCM common stock to get started in that one, in a more traditional manner.