Some Trade Ideas for Google Earnings Tonight

• Posted by Greg Harmon
• on October 16th, 2014

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Google, $GOOGL, reports earnings Thursday night after the close. The chart below shows that the stock has traded in a consolidating symmetrical triangle since moving higher in November 2014. Ahead of the report the price is falling but holding over that lower trend line. The Relative Strength Index (RSI) is oversold but as recently as April it was also in this place and bounced with the stock price continuing lower for another month. The other momentum indicator MACD is falling steadily. There is support at 523 and 515 followed by 502 and 487 before a gap to fill to 448. There is resistance higher at 541 and 550 followed by 568 and 580. The pattern break looks for a move of $112 so if it were to be to the downside the target would be 423. The reaction to the last 6 earnings reports has been a move of about 5.45% on average or $30 at today’s price making for an expected range of about 505 to 570. The at-the money October Straddles suggest a similar $32.50 move by Expiry Friday with Implied Volatility at 124% above the November at 36%. Short interest is negligible under 1%. Open interest favors the 560 Strike, but 600 if it really reacts to the upside. There were buyers of upside Call Spreads yesterday and today sees the same.

Trade Idea 1: Buy the October 530/November 510 Put Diagonal for 50 cents.
A downside directional play that if it collapses will pay close to $20. This uses margin.

Trade Idea 2: Buy the October 525/500/475 Put Butterfly for $4.
A directional downside play with a reward to risk ratio of over 6:1 at the maximum profit level at 500, with defined risk and no margin use. Profitable between 479 and 521.

Trade Idea 3: Buy the October/November 580 Call Calendar for $6.80.
A directional upside play looking for 580 to stop and positive move this week and then continuation. This trade would be adjusted weekly by selling short dated Calls against the November Calls as the previous weeks sale expires.

Trade Idea 4: Sell the October 500/580 Strangle for a $7.50 credit.
A non-directional trade, looking for history and options pricing of the expected move to hold true, with an little extra cushion.

Trade Idea 5: Sell the October 500/580 Strangle and buy the November 500/580 Strangle for $11.
A non-directional trade, looking for history and options pricing of the expected move to hold true, with an little extra cushion, but then strong movement out of the consolidation before the November expiry in either direction.

This is a sample of the daily earnings trade ideas presented in the premium blog.

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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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