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Home >> Stock Forums >> GOOG Feb07 540/550 Spread

GOOG Feb07 540/550 Spread

holzie said: "Man, I was at work and this board is blocked by the govt. firewall for "stock trading"...but I wanted to post a a great trade suggestion. -1 GOOG Feb07 540 call +1 GOOG Feb07 550 call -------------------------- Credit: 2.50 Margin: $1000 Days till expiration: 16 days This was such a nice setup with Google being up 2% during the day. The calls were so overpriced across the board. I thought GOOG doesn't move more than 15-20 points on blow out earnings, and since it is sitting at near all time high, the earnings were already priced in. I couldn't trade it because I would be using my adjustment capital on my condors.....Oh well, sometimes setups like that happen. Holzie."

dumaman said: "[QUOTE=holzie]Man, I was at work and this board is blocked by the govt. firewall for "stock trading"...but I wanted to post a a great trade suggestion. -1 GOOG Feb07 540 call +1 GOOG Feb07 550 call -------------------------- Credit: 2.50 Margin: $1000 Days till expiration: 16 days This was such a nice setup with Google being up 2% during the day. The calls were so overpriced across the board. I thought GOOG doesn't move more than 15-20 points on blow out earnings, and since it is sitting at near all time high, the earnings were already priced in. I couldn't trade it because I would be using my adjustment capital on my condors.....Oh well, sometimes setups like that happen. Holzie.[/QUOTE] what do you mean -1 and +1 ??? :whacky011:"

holzie said: "(-1) = sell one (+1) = buy one -------------- Selling more expensive - buying less expensive = credit/premium to your account Holzie."

rrvball said: "Holzie, How do you find these overpriced options?"

holzie said: "[QUOTE=rrvball]Holzie, How do you find these overpriced options?[/QUOTE] The implied volatility of the short FEB 540 call was 47% yesterday, and the MAR 540 was at 28%........now, the day after they are both at 25%.................. So, you know what this IV drop did to our hypothetical spread? It is worth 0.25 today....sold for 2.50 yesterday......one that got away :) No point to dwell on it, though. Good trades come and go. Holzie."

rrvball said: "[QUOTE=holzie]The implied volatility of the short FEB 540 call was 47% yesterday, and the MAR 540 was at 28%........now, the day after they are both at 25%.................. So, you know what this IV drop did to our hypothetical spread? It is worth 0.25 today....sold for 2.50 yesterday......one that got away :) No point to dwell on it, though. Good trades come and go. Holzie.[/QUOTE] Yes, I saw the results of the hypothetical trade. I'm wondering how you found it? Were you just looking at the google options? Or do you have some way to search for discrepancies in IV?"

holzie said: "Yes, I was watching Google all week. I know how pre-earnings IV works so I was watching the skew between Feb and March and it kept rising to a point where if Google went up 15 points instead of down 15 points today, it would still make good money. I didn't know if Google was going to go down, I assumed it was gonna spike a little, that's why I was selecting strikes as high as I did. So I was wrong on the direction. This will work on high hype high priced stocks in general. Another good one is GS. But make sure the skew is really high. If you sell unusually high IV on a steady stock, it doesn't take much to make money in all scenarios. Watch it next time Google reports. Holzie."

drdan said: "This is the best way to play earnings ...ehh Holz!"

holzie said: "[QUOTE=drdan]This is the best way to play earnings ...ehh Holz![/QUOTE] Yes, sir :) The only way, really. I mean, you have absolutely no prospects of making 300% overnight but you have 99% chance of making 10-25% overnight no matter what happens the next day......so I like that better :)"