Goldman Sachs Suggests Buying Straddles on Google

Goldman Sachs is out with a research report this morning, where it suggests that traders buy straddles of Google

ahead of earnings. Goldman Sachs software analyst Heather Bellini notes Google revenues have a 93% R-squared against US GDP and an 85% R-squared versus global GDP, and therefore Street expectations that GOOG can grow earnings by 19% next year could be at risk given the challenging growth environment. The analysts noted that over the past 28 quarters, buying a 99%/101% strangle on GOOG five days ahead of earnings has average profit of 21%, with a 55% hit rate. The analysts suggest buying the Jan2012 $640 straddle for $43.80. Google Inc. is focused on improving the ways people connect with information. The company generates revenue primarily by delivering online advertising.