How About Going Short on Facebook Inc (FB)?

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Subsequent to having peaked in December, 2014, wherein its share value exceeded all expectations and touched $81.5, Facebook Inc (NASDAQ:FB) has since dropped and is currently poised at $74.5 per share. Therefore, the question arises if going short on this stock would be a wise decision.

Carter Worth compared this stock to other names which have traced the same trend namely Google Inc, Tesla Motors Inc, Priceline Group Inc and Netflix Inc in terms of falling from peak and deviation from trendline. While each of the four stocks recorded a double figure in both cases, Facebook Inc (NASDAQ:FB) showed single figures of 9% and 2% respectively. According to Worth, this implied that if the stock experienced a break in trend any time recently, then probability of it sinking down to $63 – $65 levels is extremely high. In such a situation, investors would do well to go short and walk away with profits.

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On CNBC, Michael Khouw decided to differ in terms of tactics and recommended selling a call spread as being a better strategy. By fixing a call spread in February between $77.5 and $82.5, the trader exposes himself to three outcomes of which the two that would work in his favor entail to stock either plunging or remaining flat. Only in the scenario that it shoots up will the trader stand to lose. Therefore, going short is definitely not an option.

As a company, Facebook Inc (NASDAQ:FB) made headlines once again when it declared plans to recruit as many as 1200 new employees in a bid to keep up with expansion. In the words of Chief Operating Officer, Sheryl Sandberg –

“We are an ambitious company run by an ambitious CEO. Our users are growing and our business is growing and we want to support that.”

With drones, data centers and goggles that can transport anyone into the world of virtual reality now included in its portfolio, Facebook Inc (NASDAQ:FB) needs specialized staff to operate these departments and hence the decision to enhance employee strength by 14%.

This article has been written by Vinita Basu.

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