Earnings Preview and Trade Thoughts for Alphabet

• Posted by Greg Harmon
• on October 22nd, 2015

Alphabet, $GOOGL, reports earnings tonight after the close. The former Google moved higher in July following earnings and found resistance at 700. Since then it has moved in a broad channel, morphing into an ascending triangle in August. The target on the break of the triangle would be a move to 800 on the upside, and the Measured Move out of consolidation targets about 780.

Momentum supports more upside. The RI is bullish and turning back higher after a pullback that held over the mid line. The MACD is positive, but trying to cross down. That would create a divergence. With the price over all major SMA’s there is another positive to it. There is no resistance over 700 and support lower may come at 680 and 650 followed by 625 and 620 before 600.

Looking at the options chains the weekly at the money Straddle is pricing a $41.50 move by Friday. Over the last 6 reports the stock has moved 3.60% on average, or just $24.50. Something may be brewing. Implied Volatility is up at 120% well above the November IV at 33%.

There are big blocks of open interest at 690, 700, 730, 740 and 750 on the Call side. The biggest Strikes on the Put side are at 670, 650 and 640 but much smaller. Open interest favors a move higher.

Alphabet, $GOOGL

Trade Idea 1: Buy the October 23 Weekly 680/700 Call Spread for $10.00.
A short term spread well within the expected move, to lower cost and reduce risk

Trade Idea 2: Buy the October 23 Weekly 680/700 Call Spread and sell the October 23 Expiry 640 Put for $5.00.
Adds leverage to the short term trade with a risk of being put the stock at 640.

Trade Idea 3: Buy the October 23 Weekly/November 725 Call Calendar for $5.00.
Looks for longer term upside and 700 to be a barrier this week.

Trade Idea 4: Buy the October 23 Weekly/November 725 Call Calendar and sell the October 23 Expiry 640 Put for free.
Adds leverage and the possibility of ownership at 640 to the longer trade, in exchange for lower cost.

Trade Idea 5: Buy the October 23 Weekly 680/660 1×2 Put Spread for free.
For a downside trade, and possible entry at 640.

I like the 2nd or 4th trade the best.

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