{"id":3942,"date":"2012-02-13T11:55:46","date_gmt":"2012-02-13T18:55:46","guid":{"rendered":"https:\/\/www.optionsanimal.com\/?p=3942"},"modified":"2017-11-08T20:54:28","modified_gmt":"2017-11-09T03:54:28","slug":"facebook-stock-why-its-not-another-dot-com","status":"publish","type":"post","link":"https:\/\/www.optionsanimal.com\/facebook-stock-why-its-not-another-dot-com\/","title":{"rendered":"Facebook Stock – Why it’s not another Dot-Com"},"content":{"rendered":"

To invest or not to invest? That is the question, surrounding the news of Facebook’s upcoming IPO.<\/h3>\n
\"MENLO<\/a>
Image by Getty Images via @daylife<\/figcaption><\/figure>\n

The argument, of course, is reminiscent of the Dot-com IPO\u2019s of the late 90\u2019s and the hype involved with the Dot-com bubble.There is fear that Facebook is a new Dot-com, and that is what\u2019s keeping many investors at bay. \u00a0There are two key differences in this case that will make Facebook\u2019s IPO a better offering.<\/p>\n

The Facebook Difference<\/strong>
\nThe first difference is the company itself. \u00a0With IPOs \u2014 as with all stocks \u2014 you want to see strong earnings. \u00a0Facebook (FB) is not a brand new company. \u00a0According to its initial filing with the SEC, the company had net profits of over $1 billion in 2011. \u00a0$1 billion. \u00a0Again\u2026$1 Billion dollars. \u00a0This is not some great idea that someone has that they have sold to investment bankers that they think will work. \u00a0Facebook has over 850 million active users, and by the time they go public, they are likely to have over a billion active users. \u00a0This fact alone makes this IPO different from many out there. Facebook isn\u2019t just a solid company, it is dominant. \u00a0It has a viewership that CBS, NBC and other major media channels can only dream of. \u00a0Has it peaked? \u00a0Is there any growth left? \u00a0As for users, the argument can be made that its explosive growth is done, but as for earnings growth, it has just hit the tip of the iceberg. \u00a0I don\u2019t think Facebook has truly figured out how to optimally cash flow its viewership. \u00a0When it does, Facebook will really start to see earnings heat up.<\/p>\n

Timing of Facebook\u2019s IPO<\/strong>
\nThe second reason this IPO will do better is due to timing. \u00a0The IPO\u2019s from the Dot-com bubble were launched at a time when the economy, and thus the market, were reaching a cyclical top. \u00a0This frenzy drove stocks to ridiculously high prices. \u00a0When the economy slowed, these stocks earnings growth dried up (if they had earnings at all) and the ensuing drop in equity prices created pain for any investors contemplating investing into a stock soon after it has gone public. \u00a0That is clearly not the case this time around. \u00a0The economy is not at a top, but actually bottoming out and showing signs of improvement.<\/p>\n

The main thing to remember with IPOs, is buying at the right time is crucial. It may be tempting to jump right into a stock on the day it goes public. But since the stock has no trading history a better strategy is to wait until it’s been trading for a while and forms a base or other pattern that offers a good buy point. Also, the bases formed by IPOs are occasionally shorter than what you’d look for in a stock that’s been trading for some time.<\/p>\n

Options Trading Strategies<\/strong>
\nAnother key reason that will help you this time around will be the use of options trading strategies like the collar trade. \u00a0The options instruments can help you approach an IPO that has uncertainty, and do so with much more confidence. \u00a0This of course means that you need to be patient enough to not enter the stock until it has options available to use. \u00a0That may not happen the first month. \u00a0In fact some companies spend several months before the demand for options is available to those stocks. \u00a0In some cases companies won\u2019t allow options. \u00a0Berkshire Hathaway A Shares are an example. \u00a0With Facebook, I expect that options will be fast. \u00a0Google (GOOG) traded options the day after it went public. \u00a0Considering this IPO is arguably the most anticipated IPO in recent history, options should come quick.<\/p>\n

Zynga (ZNGA) was one of those cases where you have benefited by not jumping in right when the stock opened for trading. Traders needed to hedge their trades with options, and ZNGA needed some time to form its base, as mentioned above. \u00a0I expect Facebook (FB) to be similar because there is a lot of hype surrounding the stock. \u00a0It may not have the pullback like ZNGA, but that doesn\u2019t make my job of controlling risk any less important.<\/p>\n

Facebook\u2019s IPO is coming so now what?<\/strong>
\nOptions strategies like the Collar Trade, are crucial for controlling risk in this market. \u00a0Not only do\u00a0collar strategies<\/a> provide for leverage and cash flow, but they also help you control risk. Options allow you to profit from potential IPO\u2019s like Facebook, but do so without risking the drastic moves that many remember from the first round of Dot-com IPO bubbles.<\/p>\n

Greg Jensen
\n OptionsANIMAL CEO and Founder<\/a><\/p>\n

\"Enhanced<\/a><\/div>\n

Options Trading Resources<\/h2>\n

options trading courses<\/a> * trading education<\/a> * investing education<\/a> * option trading course<\/a> * what is options trading<\/a> * learning to trade options<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

To invest or not to invest? That is the question, surrounding the news of Facebook’s upcoming IPO. The argument, of course, is reminiscent of the Dot-com IPO\u2019s of the late 90\u2019s and the hype involved with the Dot-com bubble.There is fear that Facebook is a new Dot-com, and that is what\u2019s keeping many investors at […]<\/p>\n","protected":false},"author":6,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"default","ast-site-content-layout":"","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""}},"footnotes":""},"categories":[31],"tags":[],"_links":{"self":[{"href":"https:\/\/www.optionsanimal.com\/wp-json\/wp\/v2\/posts\/3942"}],"collection":[{"href":"https:\/\/www.optionsanimal.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.optionsanimal.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.optionsanimal.com\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/www.optionsanimal.com\/wp-json\/wp\/v2\/comments?post=3942"}],"version-history":[{"count":0,"href":"https:\/\/www.optionsanimal.com\/wp-json\/wp\/v2\/posts\/3942\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.optionsanimal.com\/wp-json\/wp\/v2\/media?parent=3942"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.optionsanimal.com\/wp-json\/wp\/v2\/categories?post=3942"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.optionsanimal.com\/wp-json\/wp\/v2\/tags?post=3942"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}