So let’s talk about my book for a moment, again I took that massive AMZN call spread below nearly 2 years ago in May 2023, Amazon was $117 and it is now officially a double, the call spread still has a ton of upside remaining as long as AMZN ends up over $250 in summer 2026.
Appreciate the write up. I've had my eye on META since you mentioned it in November. Congratulations on your AMZN trade. You stuck with your thesis, and we know b/c you show us your book!
Thank you as always for the detailed write up, JB. Excellent insight into your thesis, along with the explanation to the cost breakdown. We’ve been talking about the potential for META for a while, so very glad to see you get into a trade in such a large way, with strong conviction. Hope you’ve had a great weekend man.
I promised myself I wouldn’t miss your next big move. I can’t do the risk reversal because of the margin so I decided to just follow the player exactly and just straight up buy the 1250 calls. I bought a LOT of them (for me). If it starts to not work, I will turn it into a diagonal calendar spread.
I’ve been around 18 months now and, as you and I have discussed in the past, this just feels like another one of those cases where someone knows something. I do think it has something to do with TikTok. It feels like there are three eventualities for TikTok, all of which are bullish for Meta.
(1) TikTok banned: Meta benefits over the medium to long term as dollars and eyeballs move to Meta’s platforms.
(2) Someone not Meta buys TikTok: whoever that someone is has a high likelihood of screwing it up. Google? lol, no (see Google+). Oracle? give me a break Larry Ellison owning TikTok is like Trump owning a knitting factory. Microsoft? Nadella has repeatedly said MSFT is a b2b company. Who else is even left? Whoever it is will screw it up which is good for Meta.
(3) Meta buys TikTok: this is obviously the most bullish and honestly from a fit perspective there isn’t anybody better. Trump can call off the anti-trust regulators in the name of national security and making America great. I can’t even imagine what this would do to the stock.
All bullish. Feels like a strong thesis. Who knows…we might wake up tomorrow morning to news of TikTok being bought by Meta.
So here's what I think. It's possible META gets TikTok, but it seems like Trump's newfound BFF, Elon, is in line for that. Whatever happens, META is basically the same market cap as Tesla yet does 20x the FCF. If Tesla is going to be a $1.5T company, Meta realistically needs to be much higher. I also know Zuckerberg has stated that Apple is immensely holding down their profitability where Meta could generate double the already immense profit they do. Other than that, Meta is founder led whereas most of the mag 6 are not anymore, Zuck is young and sharp. Look at moves like adding Dana White to the board recently, I think he has big ambitions in sports with ar/vr. Then we have those glasses where they've improved dramatically over what Google Glass was supposed to be 10 years ago. Aside from all that and the immense cash it generates, you still have Yann LeCunn at FAIR leading a pretty sizable team working on AMI. Now will this all be solved in 2 years, I don't think so, but I do think META is your AI leader and I think as the market slowly realizes it you will start to get multiple expansion. At one point late 2024, Apple with no growth was trading over 40x earnings. Meta has tremendous growth and you're looking at over $30 of 2027 EPS, what happens if we get an apple multiple of 42x on $30 of EPS in 2027....you get $1,260.
I'm along for the ride if we get to the EPS and multiple you describe. I just hope I'm able to stomach the volatility.
The reason that I don't think Elon is in line for TikTok is because I think now even Elon has reached his max capacity. Given the expanse of government, DOGE could realistically take an unlimited amount of time if he let it. Throw his other companies on top of it and I think he's at his max at this point. Also he pissed off the Trump people this week with his comments about Stargate. I don't think he's in bad graces with Trump specifically for it, but man we're not even a week in to the new administration and Elon has pissed on himself. I just don't think it's Elon.
Hi James, What are your thoughts on Deepseek vs Llama? It seems like the biggest risk for META right now. Won't the market view 60B capex negatively if models like Deepseek can be built without huge capex?
You still need capex to deploy Deepseek. The software might be open source but you need the GPUs whether you’re using Llama or Deepseek or anything else. There is no way to serve AI-backed products and services to 1 billion people without capex.
Also they announced the 60B capex today. If the market had a problem with it, Meta would have been down big today. Instead it was one of the only big names that was up on a down day.
If anything the capex issue has been derisked at this point. That makes it easier for someone to make the $100m play honestly.
My take on it all is really pro China writers like Deirdre boss at cnbc, the same lady who said temu would kill Amazon, is gushing over deepseek. Deepseek is a ccp project whether they admit it or not, deepseek is fine from the videos I saw but it’s also very pro ccp ie the questions it was asked about Taiwan and in reality over the last 2 decades we always hear about how China can do xyz for less than the west and how it’s always better yet their market is beyond awful, maybe the worst in the world. Just look back to 2014 alibaba ipo and how that was supposed to topple Amazon and now alibaba is negative 10+ years later and worth 1/10th of Amazon. China is all smoke and mirrors, who is going to trust their data to the ccp?
Hi James, Sorry if it's a stupid question. I am new to substack but want to understand how to look at this. when I checked the option flow in ToS I see out of 40K calls that you noted, some one brought @07:00:53 38600 1250C calls for Jan 15th 2027 and sold Jun 18th 2026 1030C calls. Won't this make it a diagonal and not as bullish as initially thought?
Got it, I just saw the open interest for 1030C June 2026 calls. its 71K, so from what I understood, they sold the around 38K calls and rolled over to 1250 Jan 27. So many level layers to look and piece the puzzle together. Appreciate it James for your time.
For those of us without the capital to run this risk reversal, how do you suggest we play this? Lotto ticket long call? Or the usual put credit spreads?
Appreciate the write up. I've had my eye on META since you mentioned it in November. Congratulations on your AMZN trade. You stuck with your thesis, and we know b/c you show us your book!
Thank you as always for the detailed write up, JB. Excellent insight into your thesis, along with the explanation to the cost breakdown. We’ve been talking about the potential for META for a while, so very glad to see you get into a trade in such a large way, with strong conviction. Hope you’ve had a great weekend man.
I promised myself I wouldn’t miss your next big move. I can’t do the risk reversal because of the margin so I decided to just follow the player exactly and just straight up buy the 1250 calls. I bought a LOT of them (for me). If it starts to not work, I will turn it into a diagonal calendar spread.
I’ve been around 18 months now and, as you and I have discussed in the past, this just feels like another one of those cases where someone knows something. I do think it has something to do with TikTok. It feels like there are three eventualities for TikTok, all of which are bullish for Meta.
(1) TikTok banned: Meta benefits over the medium to long term as dollars and eyeballs move to Meta’s platforms.
(2) Someone not Meta buys TikTok: whoever that someone is has a high likelihood of screwing it up. Google? lol, no (see Google+). Oracle? give me a break Larry Ellison owning TikTok is like Trump owning a knitting factory. Microsoft? Nadella has repeatedly said MSFT is a b2b company. Who else is even left? Whoever it is will screw it up which is good for Meta.
(3) Meta buys TikTok: this is obviously the most bullish and honestly from a fit perspective there isn’t anybody better. Trump can call off the anti-trust regulators in the name of national security and making America great. I can’t even imagine what this would do to the stock.
All bullish. Feels like a strong thesis. Who knows…we might wake up tomorrow morning to news of TikTok being bought by Meta.
It honestly wouldn’t surprise me.
So here's what I think. It's possible META gets TikTok, but it seems like Trump's newfound BFF, Elon, is in line for that. Whatever happens, META is basically the same market cap as Tesla yet does 20x the FCF. If Tesla is going to be a $1.5T company, Meta realistically needs to be much higher. I also know Zuckerberg has stated that Apple is immensely holding down their profitability where Meta could generate double the already immense profit they do. Other than that, Meta is founder led whereas most of the mag 6 are not anymore, Zuck is young and sharp. Look at moves like adding Dana White to the board recently, I think he has big ambitions in sports with ar/vr. Then we have those glasses where they've improved dramatically over what Google Glass was supposed to be 10 years ago. Aside from all that and the immense cash it generates, you still have Yann LeCunn at FAIR leading a pretty sizable team working on AMI. Now will this all be solved in 2 years, I don't think so, but I do think META is your AI leader and I think as the market slowly realizes it you will start to get multiple expansion. At one point late 2024, Apple with no growth was trading over 40x earnings. Meta has tremendous growth and you're looking at over $30 of 2027 EPS, what happens if we get an apple multiple of 42x on $30 of EPS in 2027....you get $1,260.
This reply is great, and ideally should be part of main write-up for benefit of readers who go through the main write-up but not the comments
I'm along for the ride if we get to the EPS and multiple you describe. I just hope I'm able to stomach the volatility.
The reason that I don't think Elon is in line for TikTok is because I think now even Elon has reached his max capacity. Given the expanse of government, DOGE could realistically take an unlimited amount of time if he let it. Throw his other companies on top of it and I think he's at his max at this point. Also he pissed off the Trump people this week with his comments about Stargate. I don't think he's in bad graces with Trump specifically for it, but man we're not even a week in to the new administration and Elon has pissed on himself. I just don't think it's Elon.
Hi James, What are your thoughts on Deepseek vs Llama? It seems like the biggest risk for META right now. Won't the market view 60B capex negatively if models like Deepseek can be built without huge capex?
You still need capex to deploy Deepseek. The software might be open source but you need the GPUs whether you’re using Llama or Deepseek or anything else. There is no way to serve AI-backed products and services to 1 billion people without capex.
Also they announced the 60B capex today. If the market had a problem with it, Meta would have been down big today. Instead it was one of the only big names that was up on a down day.
If anything the capex issue has been derisked at this point. That makes it easier for someone to make the $100m play honestly.
My take on it all is really pro China writers like Deirdre boss at cnbc, the same lady who said temu would kill Amazon, is gushing over deepseek. Deepseek is a ccp project whether they admit it or not, deepseek is fine from the videos I saw but it’s also very pro ccp ie the questions it was asked about Taiwan and in reality over the last 2 decades we always hear about how China can do xyz for less than the west and how it’s always better yet their market is beyond awful, maybe the worst in the world. Just look back to 2014 alibaba ipo and how that was supposed to topple Amazon and now alibaba is negative 10+ years later and worth 1/10th of Amazon. China is all smoke and mirrors, who is going to trust their data to the ccp?
Hi James, Sorry if it's a stupid question. I am new to substack but want to understand how to look at this. when I checked the option flow in ToS I see out of 40K calls that you noted, some one brought @07:00:53 38600 1250C calls for Jan 15th 2027 and sold Jun 18th 2026 1030C calls. Won't this make it a diagonal and not as bullish as initially thought?
You read it right but wrong, they sold those calls bc they bought them long ago and rolled them up.
Got it, I just saw the open interest for 1030C June 2026 calls. its 71K, so from what I understood, they sold the around 38K calls and rolled over to 1250 Jan 27. So many level layers to look and piece the puzzle together. Appreciate it James for your time.
Love the trade, and with you selling the put your trade went from 4.7:1 to 18:1 R/R 🔥
Ya it’s eating up my margin but I like the reward potential
I just hope your 750’s go ITM 😜
Hi James, in the Meta’s times&sales, I also see STO 18 JUN 2026 1030C trade placed at the same time in spread. Is this a hedge or roll up??
They rolled up
great analysis, thank you!
Hey James -earnings is next week. Are you looking to hedge at all with a fresh position?
no
For those of us without the capital to run this risk reversal, how do you suggest we play this? Lotto ticket long call? Or the usual put credit spreads?
you can do call spreads like 800/900 or 1000/1100 there are various ways, I went for 750/1250 because I liked the total outlay with the puts sold