How to Play Google Bounce
Google, Inc. Credit Spread (Nasdaq: GOOG)
TheOptionPlayer.com sets up a Google (GOOG) short-term (8-day) option strategy. Investors could simultaneously:
Sell the September week-one expiration GOOG $835 put for $2.65 (yesterday's closing price)
Buy the week-one expiration $830 put at $2.00 (yesterday's close)
The difference between funds received and paid out is a .65 per share credit which we keep if Google closes above $835 on Friday Sept. 6th, but immediately exit the position if it appears the price will end up lower. If the stock price gaps lower then we will probably initiate the put spread at a lower strike prices with the same risk profile as described above. See Guidelines page at www.theoptionplayer.com/ for explanation on how trade is set up.
Why we recommend it:
As reported by MarketWatch, the unfolding soap opera within Google Inc.’s top executive ranks does not appear to have investors terribly concerned, despite some potentially messy implications for the company’s key business lines. Analysts reached by MarketWatch said they are not overly concerned about the drama at the Web search giant, whose shares are still up more than 20% for the year to date, despite a sell off that has clipped more than 5% of Google’s (NasdaqGS:GOOG ) market value since the company’s last earnings report. Google has been somewhat in the doghouse with investors recently, but the company is still worth $285 billion, has a dominant share of its market, and projections of 15% annual earnings growth for the next few years
The green rectangle box on the right of the chart below highlights how Google shares recovered the last time investors sold the stock to oversold levels. The recent drama described above probably contributed to this week's excessive selling to grossly oversold levels again. And chart also indicates that just like last time the stock is already starting to bounce as TheStreet Ratings announced a 'buy' rating on Google. Also, keep in mind the upcoming long holiday weekend with typically light trading volume the following week. This should translate to reduced volatility and the corresponding time value erosion we want. At the very least there is a very high probability that the stock will remain above the $835 target for another week as it has not closed below that price since the beginning of May.
52-Week High: $928.00
52-Week Low: $636.00
Average Volume (3 month): 2,107,550
The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.