This Could Drive the Next Move in Facebook
Facebook announced its video ecosystem is growing with a diverse mix of content from original series to creator content. With a growing roster of popular programs such as Returning the Favor and Red Table Talk on Facebook Watch, we’re introducing a new premium video ad program: Facebook Showcase.
Showcase gives online video and TV ad buyers participating in the upfront selling cycle new opportunities to reach their target audiences within the highest-quality videos on Facebook. Showcase is now available for campaigns targeting US audiences and includes the following products:
- In-Stream Reserve allows advertisers to reach people watching video from a selection of hundreds of the most engaging, highest quality publishers and creators. These placements are bought in advance at a fixed cost and delivered to in-target audiences verified by Nielsen. On average, nearly 100 million people in the US watch In-Stream Reserve eligible content across Watch, Newsfeed and Pages on Facebook each month.1
- In-Stream Reserve Categories includes all the features of In-Stream Reserve, and allows advertisers to reach people within contextually relevant content. These categories include sports, fashion/beauty and entertainment. And today, we’re adding food and news categories as well.
- Sponsorships allow advertisers to be the exclusive sponsor of a program for US viewers, giving advertisers the opportunity to place their ads in specific shows.
Showcase helps advertisers connect with people through premium content and unique video experiences. Today, we’re announcing a new animated comedy series on Watch, “Human Discoveries,” starring Zac Efron and Anna Kendrick. We’re also partnering with MTV Studios to launch reimagined versions of the iconic “MTV’s The Real World” on Watch with all-new seasons in the US, Mexico and Thailand. Beginning this week, people will be able to vote on a cast member to enter each of the new Real World houses and vote on which three past seasons of the show will be available on Watch.
Showcase can help advertisers reach younger-skewing audiences that are increasingly difficult to reach on TV. Over the past three months, 43% of people in the US who watched In-Stream Reserve-eligible content on Facebook were 18-34 years old,2 compared to 29% of TV viewers.3
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There are also a variety of options to measure results, including Nielsen Total Ad Ratings, Digital Ad Ratings and brand lift offerings from Facebook or Nielsen. Across 13 statistically significant Facebook brand lift studies, we saw evidence that In-Stream Reserve drives positive ad recall lift, with a median 10-point incremental lift. And of those studies, 69% saw an absolute average incremental lift in ad recall that outperformed their vertical benchmark.
Showcase makes it easy to plan, buy and measure video ad campaigns targeted at audiences ages 18+, using the same processes that premium video and TV ad buyers are familiar with. Advertisers can reserve inventory upfront, at a fixed price, guaranteed against Nielsen demographics and delivered with managed service from Facebook.
A Trade for Short Term Bulls
As with the ownership of any stock, buying FB could require a significant amount of capital and exposes the investor to standard risks of owning a stock.
To reduce the risks of a trade, an investor could purchase a call option. This allows them to benefit from upside moves in the stock while limiting risk to the amount paid for the options. However, buying a call option can also require a significant amount of capital and includes the risk of a 100% loss.
Whenever an option is bought, the maximum risk is always equal to 100% of the amount of spent to purchase the option. Since options cost significantly less than a stock, the risk in dollar terms will usually be relatively small to own an option.
To further limit the risks of the trade, an investor could use a bull call spread. This strategy consists of buying one call option and selling another at a higher strike price to help pay for the cost of buying the first call. The spread strategy always reduces the risk of an options trade.
This strategy is designed to profit from a gain in the underlying stock’s price but has the benefit of avoiding the large up-front capital outlay and downside risk of outright stock ownership. The potential risks and rewards of this strategy are summarized in the chart below.
Source: The Options Industry Council
Both the potential profit and loss for the bull call spread are limited. The maximum loss is equal to the net premium paid when the trade is opened. The maximum profit is limited to the difference between the strike prices, less the debit paid to put on the position.
This strategy could be especially appealing with high priced stocks where the share price and options premiums are often a significant commitment of capital for smaller investors.
A Specific Trade for FB
Every day, we scan the markets looking for trades that FB low risk and high potential rewards. These trades are available almost every day and we share them with you as we find them. Now, it’s important to remember these are trading opportunities in volatile stocks.
When we find a potential opportunity, we evaluate it with real market data. But because the trades are volatile, the opportunities may differ by the time you read this. To help you evaluate the current opportunity, we show our math and explain the strategy.
For FB, the April 18 options allow a trader to gain exposure to the stock.
An April 18 $165 call option can be bought for about $4.40 and the April 18 $170 call could be sold for about $2.50. This trade would cost $1.90 to open, or $190 since each contract covers 100 shares of stock.
The amount paid to enter the trade is the largest possible loss on the trade. This is generally true whenever a trader is creating a debit to enter an options trade. “Creating a debit” means there is a cost to enter the trade. You could create a debit by simply buying puts or calls to open a directional trade.
In this trade, the maximum loss would be equal to the amount spent to open the trade, or $190.
The maximum gain on the trade is equal to the difference in exercise prices less the amount of the premium paid to open the trade.
For this trade in FB the maximum gain is $3.10 ($170 – $165 = $5; $5 – $1.90 = $3.10). This represents $310 per contract since each contract covers 100 shares.
Most brokers will require minimum trading capital equal to the risk on the trade, or $190 to open this trade.
That is a potential gain of about 63% based on the amount risked in the trade. The trade could be closed early if the maximum gain is realized before the options expire.