Meta’s Financial Position and Market Response
It might be worth considering selling Meta’s 45 to 90-day options, particularly given the latest earnings reports and guidance. Recent decisions have seen the stock pull back from its peaks, which has led to higher options prices. In Q3 of 2025, Meta posted robust revenue growth of 26% year-over-year. However, this came with an increase in expenses and capital expenditures. For instance, the company’s full-year capital expenditures (Capex) for 2025 are now anticipated to be between $70 billion and $72 billion. Moreover, capital spending growth is expected to be “significantly higher” in 2026, with expenses likely rising at an even faster pace due to infrastructure investments, cloud spending, and heightened compensation costs, which experts say are attracting top talent with nine-figure, multi-year contracts.
Investors seem to be facing mixed signals. There’s the promising growth on one side, yet the rising investment and cost burdens could delay any AI-related outcomes. One particular worry is that Meta’s strong balance sheet is increasingly used to finance these ventures, often leading to more debt. Notably, at the end of fiscal 2021, Meta had about $33.5 billion in net cash. By the end of last year, that figure had decreased to approximately $28 billion. As of September 30, Meta reported about $6.5 billion in net debt. This doesn’t imply that Meta is facing liquidity issues at present; rather, the company has around $44.5 billion in cash and equivalents. However, this is still less than its total debt of over $51 billion, marking the first time a publicly listed company has had its total debt exceed its cash reserves.
Interestingly, it is also the first instance of credit derivatives linked to Meta’s debt being traded. This means that, for the first time, bond buyers are keenly aware of the risks associated with financing the company, particularly in light of its AI spending. Right now, the cost to protect against default over the next five years is relatively low, around 45 basis points, or $4,500 per million annually. This is indeed a new consideration for Meta.
A decline in net cash—or an increase in net debt—can elevate the stock’s price volatility. To illustrate, consider a $1 million home—if its value shifts by 10%, that’s an adjustment of $100,000. But if there’s an $800,000 mortgage on that home, the homeowner’s equity becomes just $200,000. So, a $100,000 change in value on a $200,000 investment amounts to a 50% change in equity. In light of this, Meta’s two-month options are priced post-earnings in a way that aligns more closely with typical pre-earnings figures. It’s apparent that shareholders are not optimistic about the company’s spending trajectory, and a return to prior highs seems unlikely in the near term.
Nonetheless, the market still anticipates that adjusted earnings for fiscal 2026 will hover around $34.50 per share. If one can acquire Meta at the six-month stock price of $572, that translates to about 16.5 times forward earnings. Selling a January 2026 590/725 option for approximately $36 (based on Friday’s close) could yield over 5.5% of the current share price in just 11 weeks. However, that carries the risk of potentially needing to buy the stock below its six-month low or shorting at less than 4% from its all-time high.
