Posts Tagged ‘Google’

Google (GOOG) Options React to Earnings

Friday, July 15th, 2011

Google StraddleWe talked about “Expiration Week Earnings Plays” in this week’s webinar (you can access an archived version from this link or peruse our webinar archive page).  During the session, we highlighted what the option market was projecting about the expected move in companies such as JPMorgan Chase (JPM) and Google (GOOG).

At the time of the webinar (after Tuesday’s close), at-the-money straddles were indicating a 3.2% move in JPM and a 4.4% move in Google through today’s expiration.  Remember a straddle is the simultaneous purchase (or sale) of the call and put with the same strikes (and same expiration). Adding the at-the-money call and put prices together is a reasonable reflection of the option market’s expected move for the underlying through the next expiration date at any given time. (more…)

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Trading Google (GOOG) Around Earnings

Thursday, January 20th, 2011


Google (NASDAQ:GOOG) is reporting tonight after the close; analysts expect per-share results of $8.09, a 19% increase from year-ago numbers. Analysts have been hedging ahead of this report by sounding their opinions on the mega-cap shares.

ISI Group initiated coverage on the shares with a “hold” rating and a 12-month price target of $675. This target allows for just 7% in upside, in line with the 7% GOOG has gained in the past 52 weeks.  (In the past six months, however, the stock has rallied 35%).

Elsewhere, Oppenheimer upped its price target on GOOG from $640 to $705 with an “outperform” rating on the stock. The firm noted that non-search revenue has improved at the search giant. (more…)

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Google (NASDAQ:GOOG) Earnings Strategies

Thursday, October 14th, 2010

Google ahead of earnings Google (NASDAQ:GOOG) is one of my favorite stocks to trade, simply because I know it well and its high stock cost makes it a great potential candidate for option strategies.  You should get to know any stock before placing a trade. The more intimate you are with a stock, the more prepared you will be.

GOOG, in typical fashion, reports earnings today, just before October expiration tomorrow. For some traders, using October options to trade GOOG just ahead of the report can be a way for them to speculate on the movement (or lack thereof) in the tech giant.  This front-month action can be a risky proposition and will tend to give traders a more binary result, with little or no time to spare.

For most of us, having a little bit of breathing room when it comes to days until expiration may be the preferred choice, if we are not looking for a dramatic (and nearly immediate) resolution. (more…)

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Don’t Get Lost in the Computing “Cloud”

Friday, October 8th, 2010

Cloud Computing Wednesday on CNBC’s Fast Money Halftime Report, we focused a good amount of time on the “cloud computing” sector.  More specifically, we discussed the pummeling many of these stocks were taking on the day.

I think the phrase “cloud computing” now is analogous to “.com” in the late nineties.  Back then, we knew the Internet was going to be big and would change many of our lives.  What we didn’t know was which companies were going to be instrumental in not only bringing the net into our homes and workplaces, but also which companies would be able to leverage themselves the most through this new way of connecting the world. (more…)

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A Couple of Ways to Play Google (GOOG) Earnings

Tuesday, July 13th, 2010

While Google (NASDAQ:GOOG) is not exactly known for a complete lack of volatility around earnings, its movements have not been all that violent (on a percentage basis).  Thursday’s earnings report may be a pivotal one for Google, with the smartphone wars continuing to heat up.

The Blackberry, part of the Research in Motion (NASDAQ:RIMM) family, still leads the sector with a 41% market share in the U.S. and of course the iPhone craze powers on, but Google’s Android operating system is still growing at an exponential rate.  I like to think of it as the 1980s Microsoft (NASDAQ:MSFT)/Apple (NASDAQ:AAPL) saga, redux.  Back then, MSFT, like Google, offered its “window” operating system to multiple computer makers.  In doing so, the company got folks across the world and on different hardware platforms addicted to its products.

Apple, in typical Jobs’ style, only sold its operating system software (and all software, for that matter) for Apple-made PCs.  This strategy hurt Apple in the early days.   Obviously, things have improved for the company and now the iPhone is like the Rubik’s Cube of the 2000s.  Apple has done a good job at getting the public addicted to a cool (albeit flawed) product.  Now that Consumer Reports won’t bless the iPhone 4 because of antenna issues, I’m looking forward to seeing how Apple spins it. (more…)

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Google (NASDAQ:GOOG) pre-earnings options strategies

Monday, July 12th, 2010
Top image for Goog bulls/bears

Google Inc.

Google (NASDAQ:GOOG) has been all over the news lately, so let’s briefly hit the highlights. Last Wednesday, JP Morgan cut its earnings estimates for the second quarter and lowered its 12-month price target on the shares to $566 from $639 (though keeping a bullish rating of “overweight”). In a similar move on Thursday, an analyst with Oppenheimer trimmed his earnings outlook on the Internet giant and dropped his price target to $500 from $715 (keeping an “outperform” rating). Both “overweight” and “outperform” are essentially equal to a “buy” recommendation.

Then on Friday, the stock was boosted higher after Google renewed its license with China, allowing it to keep operating the google.cn website within the People’s Republic. This is currently the world’s largest market when it comes to online users, but there had been speculation for months that Google would choose to exit the country due to censorship laws. The stock moved higher on this news, outperforming the broad market on Friday.

Investors who believe Friday’s gains could carry through into next week could be considering bullish strategies such as the bull call spread we’ve outlined below. On the other side of the fence, contrarian investors could be looking into a variety of strategies that would benefit if GOOG heads lower. The examples below are hypothetical and should not be interpreted as buy/sell/hold recommendations. Always consider your risk/reward parameters before placing any new trades. Prices are given as of Friday afternoon, when GOOG was trading at $464.48, up $7.92 (1.7%) on the day.

To learn more about option trading strategies or our online option platform, visit our events page and check out schedule of free weekly webinars. Upcoming classes include tomorrow’s in-depth look at covered calls in the Two Traders, One Strategy series.

(more…)

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Market Reactions to the Google Spat with China

Wednesday, January 13th, 2010
Photo by Anna Prokopová

Photo by Anna Prokopová

In a much-publicized spat with the Chinese government, Google (GOOG) has threatened to leave the country because, according to the company, its infrastructure was hacked in an attempt to gain access to the contents of Gmail accounts belonging to human rights activists in China. Obviously, considering that China already has more than 300 million internet users, this is a big deal for GOOG.

What is interesting is that before the open, the reaction of GOOG stock is muted. It is down only about $9, which on a $600 stock is about 1.5%. The biggest reaction is in Baidu, Inc. (BIDU); that stock is up about 15% this morning. The thought is if GOOG leaves, then BIDU will own the Chinese search market.

Because this is expiration week, there are some very large increases in options value in BIDU. With the stock at $445 in premarket this morning, the Jan 400 calls will now be worth at least $45. They closed at about $1.5 last night.

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Apple, Google and Intel Push the NDX into the Green

Friday, October 2nd, 2009

Green on the monitor screen is starting to appear: Apple, Google and Intel are all positive pushing the NDX index into the green.

Treasuries have sold off, giving up their initial gains and showing rising yields. This seems to be helping equities.  Perhaps all hope is not lost.

Yesterday’s late day sell-off was possibly predicated on Goldman Sachs predicting a much worse payroll number than the initial forecast.  And, guess what.  They were right!  This may be a case of selling in front of the number. Now that the actual number is released, the shorts are scrambling to cover their “profits” before they disappear.

Photo by iammikeb

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August Roundup: A Look at Some Specific Stocks Compared with Major Market Averages

Saturday, August 29th, 2009

With August almost in the books I believe it is worthwhile to look at some specific sectors and stocks relative to the major market averages.

For a reference point the SPX index started the year at a level of 903.25.  So with today’s close at 1028.93 the overall market is up almost 14%.  It is more impressive to remember that on March 9th the index closed at 676.53, after hitting a intra-day low of 666.79 (up 54% from intra-day low)

On the sector front the best performing sector has been Info Tech up almost 40% YTD.

Within the highest weighted Tech companies Apple (AAPL) stands out,  up almost 100% .  Google (GOOG) a more pedestrian 51%.  Microsoft and Intel 27% and 38% respectively.

Also a leading sector the Materials sector has enjoyed just over a 30% YTD return

Freeport McMoran (FCX) a copper and gold company stands 167% higher than the start of the year!

Heavy weight Monsanto (MON) is only better by 18%

Consumer Discretionary names as a sector are up by 23.6% from the start of the year.  This sector as it is driven by consumers has definite winners and losers.  McDonald’s Corporation (MCD) which was a relative bastion of safety in the last quarter of 2008 is actually down9.8% on the year.  This is likely because investors have rotated out of safety into higher beta higher risk names.

Ford (F) is back from the dead, taking the pole position of the top 15 members in this sector up 237%.  Remember this company did not take government money as Chrysler and General Motors (MTLQQ.PK) did.  Amazon (AMZN), up 61%, Target  (TGT) up 37% and Kohls (KSS) up 45%, are three retailers that compare favorably.

The consumer staples sector is higher by only 3% as investors have rotated out of traditional safety stocks.  Proctor Gamble (PG) is down 13% Wal Mart (WMT) is down almost 9% and Coca-Cola (KO) is up only 8%.

Lastly Financials are up 17% for the year.  This sector has had the biggest thrill ride at the lows it was down over 50%, from the lows it is up 143%!

Goldman Sachs (GS) is up 94% to lead the charge

American Experess (AXP) is higher by 84% as the consumer is still using the little green cards.

In the Banking subsector Wells Fargo (WFC) is still down on the year losing 7.3%

Citigroup (C) still has issues down 22%

Bank of America (BAC)  has recovered 27%

And J.P. Morgan Chase (JPM) is up a respectable 36% which is great by most measures, unfortunately they measure vs. Goldman Sachs typically.  So Jamie Dimon is probably disappointed.

The next move in the overall market is anyone’s guess.  The 10 day historical vol is calculated today at 10.79%.  The VIX is stubbornly staying near the 25% level, possibly indicating we are entering a more volatile trading environment into the last 4 months of the year.  The more dispersion between sectors, and between stocks in performance the more “normal” trading will be.

Remember the stock market is the ultimate forward looking indicator of future cash flows and expected growth for the economy and individual companies.

There is no better indicator out there.

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GOOG Earnings: The Danger of Vol and Time Decay

Friday, July 17th, 2009

The GOOG earnings are in the past and the stock is down $13 per share! Sounds like a big move, no? NO! Not big enough for the long straddle holders.

This is a great example of the risks of owning the straddle. Whether the stock goes up or down, the benefit of being long the straddle (long a call and put with the same strike and expiration) means investors are able to make money either way. When you own a long straddle, you are not expressing a view on direction, just movement.

The July 440 straddle yesterday closed at approximately $19.50. Today’s move has not been enough to cover that premium. The straddle is now in the money but offered at about 10 bucks! The volatility value, even with a one-day option, still has the remaining day’s vol., which has completely been sucked out of these options. For example, the 440 calls are now being offered at a mere .25 cents.

With the stock just above $430 an hour into the day, the new at the money (ATM) straddle, the 430 strike, is currently quoted at 3.40 bid 3.80 offer. This provides breakevens at 426.40 to the downside and 433.60 to the upside based on mid-market. But think about this: If Google instead was a 43 dollar stock the straddle hypothically would be 34 cents at 38 cents with 3/4 of the trading day still ahead of us. The fact that the stock is such a high priced stock, mathematically the options are likewise 10 times higher than those on a more “normal” priced stock. Perhaps these ten times higher premiums are attracting sellers looking to make a one day profit. The risk of selling a 1 day straddle are unlimited to the moves on the stock. The reward is that premium, and the time premium will decay to zero by the end of the day.

It will be interesting to see where GOOG ends up.

–Steve Claussen

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