Meta Platforms faced a setback with a $16 billion tax charge in its Q3 earnings, causing a drop in its stock value. The company reported GAAP earnings per share of $1.05, missing Wall Street’s $6.71 consensus due to this tax charge from recent legislation.

The decline saw META stock fall over 11% on Thursday, extending this trend on Friday. Despite this, there is optimism for future recovery, as the tax changes might reduce future liabilities, improving upcoming earnings. Excluding the tax charge, adjusted earnings were $7.25, surpassing expectations with a 20% year-on-year increase.

Advertising performance was strong, with a 14% rise in ad impressions and a 10% increase in ad pricing. CEO Mark Zuckerberg highlighted robust growth predictions for Facebook Reels, expecting annual revenue boosts. Concerns linger over high expenditures on AI and other areas that may not yield immediate profits.

Plans for a $30 billion bond sale to fund investments raise questions about financial sustainability given former losses in Reality Labs. Analysts note potential declines in stock price due to technical gaps. The stock chart suggests volatility, with challenges in attracting dip buyers amidst these hurdles.

The sharp sell-off in META stock has created a high-volatility environment, which is exactly where derivative traders find opportunities. The wide gap between the grim official earnings and the strong adjusted numbers means the stock could swing wildly in the coming weeks. This suggests implied volatility on options will remain elevated, making strategies that profit from price movement particularly relevant.

For traders anticipating further downside, the technical gaps toward $611 and $558.50 present clear targets for bearish plays. Concerns over the massive capital spending on AI, funded by a new $30 billion bond sale, provide a fundamental reason for this pessimistic view. Buying put options with expiration dates in late November or December 2025 could be a direct way to capitalize on this potential decline.

On the other hand, the argument for a sharp rebound is also compelling, as the core advertising business appears robust with double-digit growth in both impressions and pricing. A trader could see this as a classic overreaction to a one-time tax event, creating an opportunity to buy call options at a discount. This strategy bets that the market will soon refocus on the company’s strong underlying performance and attempt to fill the large price gap created by the crash.

Given the conflicting signals, a direction-neutral strategy that profits from volatility itself is also sensible. A long straddle, which involves buying both a call and a put option with the same strike price and expiration date, could pay off if the stock makes a significant move in either direction before expiration. This is a pure play on the uncertainty surrounding the company’s next steps and the market’s eventual verdict.

We have seen this kind of investor anxiety before, particularly around capital expenditure cycles. Back in 2023 and 2024, the market consistently fretted over Meta’s massive AI and metaverse spending, yet the stock often recovered as revenue growth proved resilient. The global digital ad market, which grew by an estimated 8% in 2024, has shown it can support such investments, providing historical context for a potential recovery.