One of the nice things about trading options on the stock "Google" is that no one has any preconceived notions as to how it is going to trade tomorrow or the next day. Company annoucements tend to be big ... like the building of more infrastructure which will take years to happen. It's not like with the company Ford which could be this week announcing recalls on every green Bronco it made in the last three years and then next week have recalls on something else. The last time "Google" had an earning's report come out was back in October so there is nothing much new to worry about in their near term. That's my deterimation, I could be wrong. Look at this chart on Thursday November 20th. It's of "Google" trading in the morning. When I scanned across a number of stocks this morning about thirty five minutes into the trading session this was one of the few stocks moving up sharply in price. Have I been following "Google" closely over the last few weeks? Not at all. It's the chart that attracted me. Look at how it shoots up on the openings and then just gives up the gains. Is this a pattern?.
On other stock sites this morning there were more detailed charts showing a break out on the opening. It "gapped" upwards. Let's now look at it's pricings on two series of Puts at 10:16 a.m. and at 10:17 a.m.. Why am I showing "out-of-the-money" Puts and not "in-the-money" Puts?". If doesn't really matter. They cost less. The second of these Put options which are further "out-of-the money" kick better in price if a really big decline starts to materialize. They cost less but do poorly if the stock only drops a little bit. Pegging the moment of a reversal in the stock's price is the crux of the matter. You have to decide when. The difference in the stock's price over five minute intervals makes a big difference. That's the hard part.
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We have some good news. Well good news for anyone holding the Puts. The stock ended up tanking for the rest of the day. Getting into to Puts almost any time after 10:40 a.m. would have made you money. Look now a it's end of the day closing chart.
The stock has dropped big time. Our 10:16 a.m. reference point was about 15 minutes before the high of the day. Now look at the closing prices on these Puts. Be prepared to be dazzled.
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Now sometime before the closing bell a decision has to be made. Tomorrow is Friday. Will there be more downside action to follow? If so how do you want to play it? Here is what the 290 Calls and Puts look like going into tomorrow's action.
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Will Google jump again on tomorrow's opening? It might as this stock might be oversold. All I really know now is that todays "Put" action was a walk in the park. A friday morning update. Google is up in the premarkets an hour before the markets are opening.
Here is how Google ended up closing the day.
The 290 Calls proved to be the winners of the day.
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