My high conviction trade of the year: Full ported into META calls (looking good on both ends: technical and fundamental)

TLDR:
Macro: Risk on sentiment + rate cut buy the rumor repricing + end of year FOMO/FOMU trade

Technical: price reclaiming 600s and hitting EMA + crypto/small cap rally hints a good possibility that market is risk on again.

Fundamentals: META’s valuation now might be considered expensive in a bear market, BUT it’s a bull market now and META is CHEAP!

And position and trade plan at bottom.

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Buying into strength today as META has reclaimed the 600 level and touching EMA.

Market sentiment is also recovering as we are getting back to risk on. (Crypto and small cap rally is a good indicator)

On top of that the rate cut sentiment is coming on again. With the fed in trumps hands, it’s really unlikely that a cut won’t happen so I definitely will buy into a fed cut induced rally (and my prediction is this rally will continue into fomc week with a sell the news event following the cut & market end off the year with a rally).

This makes me believe that the year end FOMO and FOMU trade is back on again. Where portfolio managers go long on mag 7 or AI names that are underperforming ytd with hopes of a catch up trade.

Fundamentally, META is not cheap but certainly not expensive here:

EV to EBITDA: sub 15x (it’s almost half as cheap as GOOG here - I agree GOOG is a much better business but 50% discount in a bull market riding the AI secular trend? I call this deep fucking value)

also, META trades at 35x FCF. This may seem expensive if you are value investor. But again, we are in a bull market (so story drives price growth, not valuations) plus META has the first mover advantage in the AI secular trend and is still founder led. So I’d argue they deserve a premium and I say this valuation is more than justified here. And let’s compare other mag 7: GOOG 53x FCF, MSFT 45x FCF, AMZN 232x FCF, NVDA 58x FCF. So yeah it’s deep fucking value here.

Price Target: If we are being conservative here and have META touch its previous valuation highs of ~42x FCF, the price will be $725. (A 20% upside)

PE ratio is pointless as different companies have different capital structures plus it doesn’t work on high growth names so I just look at EV EBITDA and P to FCF instead.

Position & Game plan:

2026 April $700 call a few METU calls across different accounts with May 2026 expirations.

As my modest target price is $725, I’ll be writing month out covered calls with strike above my target to offset some theta and lower my cost basis.

As for take profit and exits, I will exit around late Jan - mid Fed to avoid theta decay acceleration. If META goes above $700, I will monitor the position closely and exit the trade as soon as day candle breaks below EMA.

Stop loss: I’ll exit if META breaks below 570, in which case I’ll wait for April lows and then get back in again.