Options Alert: Potential Comeback Trade in Meta

Meta Platforms is near long-term lows, and one big options trader may expect a rebound toward its old highs.

This large transaction occurred yesterday afternoon in the social-media giant:

• 15,396 January 750 calls were purchased for $12.35.
• 30,792 January 830 calls were sold for $6.10.

Calls fix the level where investors can buy a security, so they often gain value when prices rise. Traders often buy and sell calls in a single transaction, using the premium from one contract to reduce overall cost and increase leverage. The practice normally involves equal numbers of each option to create a "vertical spread." However they can use different sizes in so-called "ratio spreads."

In the case of Monday's transaction, the investor sold twice as many calls as he or she purchased. That reduced their cost to just $0.15 per contract. The resulting position could inflate to $80 if META closes at exactly $830 on expiration -- a potential return of 53,200 percent from the stock climbing 45 percent.

Such extreme leverage has risk because they're short twice as many contracts as they're long. That means gains diminish above $830 and turn to losses over $909.85. (In contrast, a traditional vertical spread has no upside risk.)

META ended the session down 1 percent to $572.41. It's lost 13 percent of its value this year amid worries about capital spending and litigation. However, the shares held their ground after testing a price zone around $530 that was first reached in April 2024. 

The stock never traded above $800, so the bullish ratio spread may simply target a limited rebound. (Profits would mostly occur above $750, a level META approached without breaking on January 29.)

Overall options volume was slightly below average in the name, according to TradeStation data. Calls accounted for a bullish 73 percent of the total.

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