Bull v. Bear: META AI Ambitions Face a Reality Check

to Fast Market here on Schwab Network status update for meta shares are moving higher today as the stock looks to reclaim lost ground after yesterday's decline. It's been confronting the challenge plaguing the tech sector this week. Worries about political fallout tied tohe AI data center build out. Speaking after the election, meta pnt Dina Powell McCormick said the midterm results could make it more difficult for companies todevel. Speaking at Wall Street Journal tech conference, she conceded that the industry hasn't done enough to explain the benef of massive investments to local communities. Keep in mind, meta has data centers iny two dozen states, with five projects planned at one gigawatt or more. The big question for investors could its AI ambitions slowst as it was reclaiming some ground in market cap thisr? All right, time n for the tug of war on meta platforms. For that, let's welcome back in Tom white. And joining us now for the debate and analysis. W want to bring in Scott Bauer, CEO ofrosper Trading Academy. It's bull versus bear time. Scott good to see you. And before we getur example, Trey's got to get each of your thoughts, your take on meta. Scott, I'll with you. Your take on the fundamentals. Meta had beentaging some recovery. Then it's fac headwinds recently. Once again, it keeps having these big speed bumps this year. What's your thought on meta? Big speed bumps. But every time that we've seen these sell offs i been a buying opportunity. So you know the whole data center situation conundrum, whatever you want to call it. I think things kind of ease up a little bit, we ge a couple of weeks now, maybe even a month from now, what we're going to see are t big names, the leaders. They're going to he, that really kind of move forward from here, whether it's a meta, an alphabet, you know, take anythem that you want to look at. So I really like meta here. I don't I don't necessarily say that,isten, we're going back up tomorrow, next week. That's why when we talk about my trade example here, giving it a little bit of time. Okay. All right. So let's bookmark that. We'll come back to your trade example s. Tom. I want to cross over to you and get your take on meta before we get into these example trades. Yeah, I think you take a look at it. You know, their recent earnings kind of reflected you know what maybe ig to have on the AI infrastructure, right? Whether it's chips, whether it's equipment semi equipment makers versus what meta has, is platforms across the landscape on a daily basis. So they've got the eyes, their core revenue business as far as advertising is picked up. And they've relied on that, r Because they do have the eyes and they're leading in that aspect. But at the same timetenr revenue stream with their agent that's got investors excited. Now we've seen a pullback. And you know they're not immune to pullbacks in the overall space. But a lot of optimism has come back into the stock. Even t negative free cash flow coming on board. They just raised ano billion a little bit above above what they anticipated at this point So yeah they're spending right. But are they going toe able to monetize AI as well as the other players? Well, 2 or 3 months ago, before the early September, there were questions about that. Right.Andd it's the number one downloaded app on the Apple App Store at this point. So yeah, they're getting traction there. Now it's going to be about monetization and keepingp because every one of these hyperscalers is going to keep coming out with new, you know, newnts. Are they going to be as good or better than muse? Is muse go be able to keep up? Those are going to be the questions. But you can't dispute the fact that they continue to do well in the core si of their business, to allow them to do these investments in AI. But at the same time, can they keep that take market share away from maybe some other some of the other agents? All right, l get into the example trade. Scott, let's cross backr to you. What's the approach you're taking? Yes. I'm going out to December. Regular expirations about six weeks or so from now. And I'm putting on a ratio cal butterfly. And I'm doing this in a ratio of one by three by two instead of just a one by two by one, because we are seeing still very expensive implied volatility option premium. So by doing a 132 instead of a 121 it mitigates some of the volatility here. So I'm looking to buy the 640 call. Sell three of the 670 calls and then buy two of the 670 fives. If I can do that for about 750 or so. The reward to risk on that in my opinion, is real nice.ou know, the December expirat either wayto of a bigger move than that almost, you know, $50 move or so. So I love the target here of 670 for that. And again, I'm not lng for meta to necessarily continue this you know little todayt week. But I think over the next six weeks as the market kind of settles out, this is an opportunity. All right. Yeah, yeah, yeah. I'll go ahead and break this one down. Scott throwing us a curve ball here. I love it on the show for this bullish example trade. Thanks Scotty. Yeah. Buying going to the December monthly option. So we've given them 42 days in this position. So it's giving him time to develop. Right. And to go in the direction that he wants it. But let's break it options. Buy one of the 640 calls. Sell of the 670 calls and buy two of the 675 strike calls paying roughly. We've got it's about 750 debit t change here on the on the risk profile, but the debit you pay is going to be a risk. So if you pay 750, $750 in risk on thistial trade and what you got is your that's your risk $750 with the max profitability around 2250. Right. So pretty good risk rewardup now above the 670 strike. Scott loses some of that profitability on here. But still more than a double in profitability even if it goes above that 675 strike. it's almost like a measured bullish trade where you want it to go to the short strike where you're short three ons at 670.ut anything above that break even of about 647 50 is going to be going to be profitability. N stock's currently trading a $620. So on Scott's trade you definitelyto move to the upside on a percentage basis to getre. The key here I think with Scott's position is that he's giving himself dur on this 142 days for this trade to develop where we can dig into some of the lthat we've had recently there. But Scott, I'm going to r my trade real. I want to get your thoughts on it. Mine's a little bit more passive where Ie potentially profitable. I looked at a short call vertical and I changed the duration tootr 20th monthly option. So just 14 days to expiration, really short term positioning, selling the out of the money, 660 strike call and then buying the 670 strike call. So a short $ wide neutral to bearish call vertical. I'm collecting roughly about a $2 credit on that. That's what you can make $200 per spread with $800 in risk. But it takes my break. Even Scotty on this one all the way up to 662 to the upside on there. That's about $42 above the current share price. Your thoughts here on the sho call vertical? I like it from the perspective of probability that the probability of it hitting is probably not likely just over the next two weeks. What to me, myoncern would be, and for the way that I trade is the reward t risk. Right? I'm laying $8 potentially if there's aig blowout move to the upside to make two. So that. But I do think that the probability of that trade being successful is pretty high. That's why I love bringing Scotty, you know, veteran trader here on the show for e exe make good point. Right. We talk about this all the time. It's the trade offs right. Yo only going to make $200 on this spread. But you've got 0 strike that you're selling in this short call vertical finishes othe money, which is what you want. You want it to finish below over the next two weeks below 660, about a 78% probability of finishing out of the money at expiration. So higher probability of success means you'ot more risk versu potential reward on the short call ver But yeah, there yo Diane. A little passive on the bearish and a little bit Scotty a little bit more aggressive on the ratio cl butterfly. Scott thank you so much. We really appreciate your contribution