How to Play the Google Earnings Announcement With Options

Today I submitted an article to Seeking Alpha that I would like to share with you.

How to Play the Google Earnings Announcement With Options

Here’s the link – Google Option Strategy

There are lots of ways to make money with multiple calendar spreads.  Finding an underlying stock which enjoys an implied volatility (IV) advantage is a good start.  If the options that you are buying have a lower IV than the ones you are selling, you are buying relatively “cheap” options and selling relatively “expensive” options.

A temporary IV advantage often arises in the few weeks before an earnings announcement.   It is especially true when the company has a record of exceeding or falling behind analysts’ estimates by a larger-than-average amount.  Apple (AAPL) and Google (GOOG) are two companies that fit in that category. 

Google is slated to announce earnings just prior to the expiration of the October (monthly) options.  Since a big move in the stock has historically often followed Google’s earnings announcement, the October options have soared in value (over double what they would be if an earnings announcement were not coming along).  This causes a significant IV advantage to buying calendar spreads at this time.

While having an IV Advantage stacks the deck in your favor, it should not be used as a sole determinate in choosing an underlying instrument to trade options on.  It is possible to make good returns with the 10K Strategy when you don’t enjoy an IV Advantage, but it is extremely helpful whenever option prices make it possible.  

Any questions?   I would love to hear from you by email (terry@terrystips.com), or if you would like to talk to our guy Seth, give him a jingle at 800-803-4595 and either ask him your question(s) or give him your thoughts.

You can see every trade made in 8 actual option portfolios conducted at Terry’s Tips and learn all about the wonderful world of options by subscribing here.   Why wait any longer to make this important investment in yourself?

I look forward to having you on board, and to prospering with you.

Terry