Google Options (GOOG): Unusual Trading Activity

| July 19, 2012 | 0 Comments

GOOG OptionsOptions in the multi-billion dollar internet search company Google (GOOG) are showing heavy activity today.  

However, this is to be expected as traders patiently await the news…

That’s right, Google reports second quarter earnings after the close of trading today. 

So, how are option traders setting up for this event?

Traders consider this report important because they know it’s going have a profound impact on the remaining big cap tech stocks due to report over the next few weeks.

Our tracking system indicates the premium built into the GOOG options suggests a $32 a share swing in either direction. That would be a 5.5% move for Google.

As I write, Google is trading at $593.02 a share.  And option traders are starting to pile into call options.

Right after the open today, one trader initiated a $590-$600 call spread in GOOG.  This is obviously his way of trading for a move higher. 

Remember, a call spread is an option strategy where one call option is purchased and another option is sold at a higher strike price.  This is done to reduce the cost of the options, as well as to limit the trader’s risk.

You see, with a spread, an option trader can’t lose more than the difference in the strikes minus the amount paid for the position.

Getting back to the trade…

The trader came in buying the July $590 call options and selling the $600 call options.  He made this trade 1,700 times at $4.00 a share.  The total cash outlay was $680,000.

Now, all this trader needs Google to do is trade above $600 a share by tomorrow’s expiration. 

If this occurs, he’d better have big pockets!  He’ll not only recover his initial $680,000 investment, but he’ll also make an additional $1,020,000 profit.

The question now is will GOOG outperform once again?

As most of you know, Google is a technology company.  It maintains web sites and other online content for users, advertisers, and Google network members.

With Google providing so many services, option traders think this company is poised to move higher.  Let’s not forget, before the infamous 2008 market crash, Google was trading at $740 per share.

And it could easily see this price again soon. 

In other words, GOOG is currently undervalued according to most analysts. 

What’s even better, Google’s water faucet of cash is allowing them to focus on providing new and significant opportunities for growth.

Finally, Google’s rise in the smartphone market share through the Android platform is helping to extend their advantage in the mobile world.

I believe option traders who think Google is going higher will be rewarded very soon.

For more detailed information on unusual options activity and how you can profit from it, be sure to sign-up for our daily newsletter, Options Trading Research.  It’s always 100% free and packed full of option trading ideas you can use immediately in your own portfolio.  Click here to subscribe for free.

Safe Trading,

Marcus Haber

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Category: Unusual Options Trading Activity

About the Author ()

Marcus Haber is the co-editor of Options Trading Research and boasts well over a decade of real-life options experience. Learning from some of the biggest names in the business, Marcus has served as an Options Strategist for a number of firms and was also appointed to the Options Advsiory Board with Pershing, a branch of the Bank of New York.