Google Earnings Trade Ideas

• Posted by Greg Harmon
• on July 19th, 2012

Google, $GOOG, reports after the close tonight. Coming into earnings it has been moving higher testing the top of a basing range with 555 as the low and 597 as the high. The Relative Strength Index (RSI) is about to cross into bullish territory, with a Moving Average Convergence Divergence (MACD) indicator that is positive and growing. This has an upward bias. There is resistance higher at 603 where the 100 and 200 day Simple Moving Averages are meeting the extension of the downtrend resistance from 2011. Above that there is room to resistance at 616 and 634 followed by 646 and 657. Support lower is found at 588 and 578 followed by 565 and 555. The reaction to the last 6 earnings reports has been a move of about 8.2% on average or $48 making for an expected range of 547 to 643. The at-the money July Straddles suggest a $31.50 move by Expiry with Implied Volatility at 125% in the front month well above the historical at 20% and August at 31%.

Google, $GOOG

Trade Idea 1: Buy the July 610/625/640 Call Butterfly for $3.
Buying one contract each of the July 610 and 640 Call Strikes and selling 2 of the 625 Call. This makes money on a close between 613 and 637 tomorrow, with a maximum at 625.

Trade Idea 2: Sell the July 550/530 Put Spread for $1.25.
This is a bet that the gap of historical support and resistance between 546 and 555 is not breached.

Trade Idea 3: Combine trades #1 and #2 for a net debit of $1.75.

Trade Idea 4: Buy the July27w/August 630/640 Diagonal Call Spread plus selling the July 550/530 Put Spread for 15c.
Selling the July27w 630 Call and buying the August 640 Call, essentially a bet that the price does not exceed 625 tomorrow, but with some time to play with the pieces.

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