Meta shares fell 3.4% even as elevated options pricing set up a bullish trading strategy, options strategist Mike Khouw says. The structure uses a near-dated short strangle to help finance a longer-dated call, betting Meta holds between $700 and $900 before rallying into year-end.
Meta drops as options premiums stay rich
Meta shares fell 3.4% to $751.19, down $26.40, as of 2:00 p.m. EDT. Yet the pullback comes after a rally so sharp that it reshaped pricing across Meta's options market, according to Mike Khouw.
Meta's one-month implied volatility is running near 44%, about one standard deviation above its 37% mean over the past year. That gap suggests near-term option premiums are historically rich, Khouw says, and opens the door to a strategy that collects time decay while keeping a bullish long-term stance.
A strangle to fund a longer bet
Khouw's approach centers on a near-dated short strangle, roughly a month out, using the October 30th expiration. Writing an out-of-the-money call and an out-of-the-money put lets a trader harvest elevated premium as time value decays quickly.
That collected premium then helps finance a longer-dated January long call. Even when the January call costs more than the near-dated strangle collects, the trade can still carry positively, since short-dated options lose value faster through theta. The goal: Meta shares stay between $700 and $900 through October expiration, then rally into year-end.
Hardware push adds to the bullish case
Behind the stock's run-up sits a new consumer hardware product, the "Muse Charm," which uses Meta's AI following the launch of its AI agent, Muse. The Charm is a keychain-sized device meant to let Meta bypass the Apple-and-Google duopoly on how people interact with AI.
Meta paired the Charm with lighter-weight virtual reality goggles and audio-only smart glasses at Connect, broadening its wearable lineup. Muse itself is already linking into retail through partners including Walmart, Best Buy, and Gap, Khouw notes.
Source: CNBC
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