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How to Buy Into Facebook (NASDAQ:FB)


Didn't buy into Facebook when you should have? You can use options to create a "buying program" now.

At my firm, we like buying things at a bargain. For instance, if anyone out there wants to sell me their brand new iPhone 5 for $100, I am listening!

But one of the hardest things to do psychologically as an investor is purchase a stock or ETF while it is in the middle of a decline. The decline truly tests how much of a 'bargain' you really thought that stock was.

When Facebook (NASDAQ:FB) had its IPO, we said we'd be interested in buying it if it went down to the $20 to $21 range.

So some folks have asked us if we now own it since it dropped all the way down to a $17+ handle. The answer is no. We saw that its momentum was going to make it drop well under $21, so we waited. But then we missed our opportunity. We didn't buy in around the $17.55 lows. And today it is trading at just under $23.

So, we didn't follow the discipline and force ourselves to be buyers at $21 – even though we'd be happy today to have bought in to Facebook at $21.

So, how can we remedy this? We can use options to create a 'buying program' for Facebook. The buying program involves selling puts at the $20 price for Facebook that expire in the near month. Then, if Facebook dips to that price, we will get assigned and be forced to buy it at that strike price (i.e., the $20 price).
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No positions in stocks mentioned.
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