Google reports earnings after the bell tomorrow. Historically the company has reported the night before monthly options are set to expire. This creates the potential for substantial profits trading out of the money options. On the flip side if GOOGLE stock makes a small move post earnings out of the money option contracts will drop dramatically in value. The potential reward of significant profit comes with incredible risk to your capital. In April of 2007 GOOGLE rocketed some 20% higher. CALL contracts went through the roof a $.55 Call contract was worth over $55 the next trading session. That is $1,100 into $110,000.
Could we witness another massive move from GOOGLE post earnings? Or will it revert to its 1-3% post earnings move and suck the life out of 95% of the OTM options?
$GOOGL has been in a nice upward channel since the start of 2012. I expect that trend to continue throughout 2014. With that being said I see $GOOGL breaking out to record prices this year. Could their 7/17/2014 earnings report be what sends the stock to new record levels?
After the massive upside move in November, it can pay handsomely to trade GOOGL for a sharp move post earnings.
One strategy you could employ is buying calls/puts in the morning and selling them a few minutes before the close as volatility ramps up.... and possibly holding on to a few into the earnings report.
With the amped up volatility a spread could be a smart move to reduce cost, but it also caps your profit potential.
The market is pricing in almost a 5% move for the earnings report. Here are the trades I may look to make heading into it:
The $540 puts at $.75
The $635 calls at $.85
$GOOGL will be the headliner this week, with $AAPL $AMZN $NFLX among others yet to report. With the market sitting right near record prices, it should be an interesting earnings season.