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Here's what's happening with Google: They slipped under the 200 dma back on the 20th and are trying to consolidate for a run back up. The Friday jump was based on a rehash of old news regarding a click fraud settlement where it turns out Google will only pay $30M in cash to the legal sharks who pushed the case while actual advertisers affected will get a whopping $3.80 per $1,000 credit on future ads.

Don't even get me started on this BS from the advertisers point of view, but this is a very legal way for Google to pay off the victim's lawyers to take a settlement that amounts to 4 tenths of a cent on the dollar - and they don't even get that in cash! Meanwhile, if you're a Google shareholder - Yay!

Also, this was the traditionally slow 2nd quarter so we should be expecting great things from the stock, hopefully great enough to justify a p/e that's creeping back to 60. Last time Google took a dip I maintained that it needed to retest $330 in order for it to break $450 and make a serious run at $500. You need every single non-believer out of this stock to make that kind of run with a $120Bn S&P listed company. Look at MRK and PFE and the false starts they had until they finally got a nice bottom test to build on in the fall.

Right now Google is nice and rangey between $380 and $420 but it is in mortal danger of a nice $50 correction if it slips below $380. The daily chart says slightly oversold but the weekly chart says look out below. I'm not sure the fund flow can get much worse for an S&P staple without the whole market turning down so there's an interesting play to be had by buying the Jan $430s for $22 and selling the Dec $450s for $12.25 which gives you a 50% refund on your call and a $20 + 1 month spread between you and your caller. If we assume current premiums persist then Google would have to be around $410 on December 15th for you to be in the money.

So IF Google opens today above and stays above $380 and the Nasdaq breaks 2,100 - I enter the Jan $430s with a 3/10 position and wait to get $14-15 on half in December $450s then wait on the other half for a nice move up (treat it like a trailing stop order). We'll check up on this as the week progresses.

As a risky side bet, I take a 2/10 position on the Sept $440s at $2.75 (but only if the conditions are met!) as a $20 drop brings me down to $1.25 while a $20 rise brings me to $6 (apx and only if it happens soon!). In both cases I'm betting on Google to get a little giddy but then pull back to at least $380.

Source: Options Trader: A Google Strategy