Meta shares look 'iffy' into earnings. How to trade it

Meta heads into earnings Wednesday after the bell with the fundamentals case largely intact. Ad-pricing improvements and sharper targeting continue to drive roughly 30% year over year top-line growth — a number that commands respect at this scale. The options market implies a substantial 7.5% move by the end of the week. That's a lot for a company this big, but it's justified given the big moves Meta has seen following earnings recently (the stock moved more than 10% following earnings in three of the last four quarters). We've seen some big call buying lately. The June in-the-money 620 strike calls, for example, saw substantial opening buyers Monday. So did the May $675 calls, which cost substantially less and are more focused specifically on earnings. The trade Personally, I wouldn't buy the stock or either of those two calls; instead, I would look to trade a spread — specifically, the 625/680/750 call spread risk reversal — selling the 625 puts and 750 calls to help finance the purchase of the 680-strike at-the-money calls. Here's why. First, technically, despite the solid fundamental backdrop, the technicals are a bit more iffy. Meta is lingering around the 150-day moving average, and, having recently fallen below it, this reversion may be a head fake. Other technical signals, such as the commodity channel index and Bollinger bands, also indicate that the stock's position is precarious. …