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Meta Platforms (META), fka Facebook, has fallen out of bed this year. This presents a unique opportunity for enterprising investors that sell short puts and calls to create income. This article will describe this opportunity.Revenue in Q2 was down 1% YoY but operating earnings were off 32%. Its operating margin fell from 43% last year Q2 to just 29% this year. As a result, META stock is off over 50% YTD. This means the stock now trades like a value stock and is attracting value investors given how cheap it is now.For example, analysts now project that earnings per share (EPS) will be $9.78 in 2022, but are projected to rise by 14.3% to $11.15 in 2023. according to Barchart, and $11.18 (42 analysts surveyed by Seeking Alpha). So, at today's price (Aug. 23 morning) of $164.84), META trades for just 14.7x earnings going forward.What META Could Be WorthThat is a far cry from its 5-year average forward price-to-earnings (P/E) multiple of 23.69x, according to Morningstar. This implies META stock has good upside. So, for example, if META trades at just 50% of this difference in valuation or a P/E of 19.2x, the stock could reach $214.66. That's up 30.8% from today's price.This is actually less than analysts' targets. For example, Barchart reports that the mean price target on Wall Street is $234.45. Seeking Alpha says that 55 analysts have a $222.92 average price target.This also means that the covered call income plays and the short put income option plays are very lucrative. We can also use this to set strike price targets.Covered Call and Short Put Income PlaysShorting out-of-the-money (OTM) covered calls and OTM short puts can provide substantial income with META stock. The premium levels are high as investors seem to expect the stock to rise from here.Look at the OTM strike prices that are 10% away from today's price. Their average income potential for one month out is over 2%.For example, the table below shows that the Sept. 30 call option $180 strike price (i.e., 10% over today's price) provides covered call investors an income play of $3.47 per contract.META calls - Barchart - $180 strike price - as of Aug. 23This means that if an investor were to buy 100 shares at $16.34 for $16,340 and then sell the $180 strike price calls, the investor would receive $347 immediately. That represents an income yield of 2.1% (i.e., $347/16,340). Since this expiration period is only 38 days away, the investor could potentially repeat this 9.6x over the coming year, providing an annualized return of 20.2%.Moreover, if the stock were to rise to $180 by Sept. 30, the investor would make a 10% capital gain. This a great potential return for value investors, especially since META does not pay a dividend now.The same is even more true by shorting OTM META puts at the same expiration period. For example, look at the put option chain table below. META Puts- Barchart - Expiration 9-30-22 - As of Aug. 23, 2022It shows that the $150 strike price (8.1% below today's price) provides $4.00 in potential premium income to the cash-secured short-put seller. This means that an investor has to put up $15,000 in cash with the brokerage firm in case the stock falls to $150.00. But in return, the investor immediately receives $400 in his account. That represents a nice 2.67% yield for just over one month of risk. Over the coming year that could be repeated 9.6x and the annualized return is 25.6%. And even if the stock falls to $150.00 the investor now has bought in at a cheaper price and can do a “wheel” strategy of selling OTM covered calls to make more income.The bottom line here is that given how cheap META stock is right now, value investors can make a good income selling OTM puts and calls. This is because the stock is undervalued and could rise to higher analyst price targets.More Stock Market News from Barchart
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