Here’s the GOOG Earnings Strategy Alert that members received at 2:54pm EST today. Join the Earnings Alert family today!
Our favorite earnings candidates today are GOOG & IBM. The rest of the names on the potential candidates list we shared in the SNDK exit details email have super wide bid/ask spreads or lack options volume. We decided to go with GOOG…we like the strategic choices better than IBM. Small position, live to fight another day if wrong.
As always, we are simply sharing what we are going to do. Follow at your own risk.
Earnings Trade Candidate: GOOG
Easy to Borrow (ETB): yes
Liquid Options: strong OI & volume, wide bid/ask spread of 30-50 cents
Offers Weekly Options: n/a. Apr expiration is tomorrow
IV differential: approx 2.8x, 84% front month IV vs. approx 30% historical IV
Current Price: 766.40
Expected Earnings Move: +/- 35.40
Expected Move Range: 731.00 - 801.80
Copy the trade below and paste it into our recommended broker, thinkorswim (adjust number of contracts according to your capital risk preferences).
SELL -1 IRON CONDOR GOOG 100 APR 13 800/805/730/725 CALL/PUT @2.00 LMT
Iron Condor Legs (per spread):
Buy 1 GOOG Apr 725 Put (debit from account)
Sell 1 GOOG Apr 730 Put (credit to account)
Sell 1 GOOG Apr 800 Call (credit to account)
Buy 1 GOOG Apr 805 Call (debit from account)
Max Potential Gain: $200 per spread if GOOG expires expires between 730 & 800
Max Potential Loss: $300 if GOOG expires below 725 or above 805
Break Even: 728.00 lower b/e, 802.00 upper b/e
Explanation: GOOG has a very wide bid/ask spread which we tend to stay away from, but GOOG is one of the few we give a pass to given the massive options volume and open interest. It could be a huge swing, so we don’t want to sell a strangle. We need defined risk here to feel comfortable, and small size as usual since it’s an earnings based trade. With that in mind, we went with the Iron Condor which gets us 1x outside the expected move range (so it puts us right at both ends of the range) and provides a credit of 40% the width of the spread assuming a 2.00 credit fill. We usually look for a 30% credit on a 1x outside the expected move Iron Condor, so this pricing is favorable.
This Iron Condor gave us a little more wiggle room on the downside All in all, we like it enough to give it a shot.
Here’s a risk plot profile and 6-month chart showing the profits zone (green oval) of the GOOG Iron Condor:
NOTE: Trading Options into earnings includes financial risks and may result in loss of capital. Do not consider an earnings based Options strategy unless you understand and accept the capital risks associated with the trade.