Should you buy ahead of earnings?

5 Okt 2016

Google has been trending up nicely.
If you missed it, what should you do?

TRENDING UP, BUT PAUSING
- Long and medium term trends: up.
- Short-term: high flag consolidation ongoing (same as NASDAQ).
- Short-term technical indicators: turning negative?
- Would like to see a break/hold above $819 for a continuation of the uptrend.

MANY UNCERTAINTIES
- Toppish market, ripe for consolidation.
- $770-$785 gap needs to be bridged.
- Upcoming earnings (October 27).
- Potential bid on TWTR.
- Pixel smartphone.

HOW TO PLAY GOOGL?
- Holders keep holding but beware of $800, $785, $760, $670 (stop-loss levels).
- Non holders should buy Nov 18 $825 calls at 17.20/share (2.14%) to benefit from eventual earnings pop.
- The purchase could be matched with same maturity put sale strike $760 at 11.70/share (1.46%).
- Total strategy cost 0.68% to benefit from earnings upside or go long 5% lower.

19 Okt 2016

Trade aktif

At yesterday's close, traders who followed this recommendation would be making money on both legs (call and put) for a total of c. 10.80/Share (+1.35%). Compared to initial strategy cost (0.68%) this is an effective 2x reward versus intial risk.

19 Okt 2016

Catatan

I would continue to hold the position into earnings.

20 Okt 2016

Trade aktif

The call is now in the money and the put strike is 8% away. The position is netting +1.84% gains so far. Keep the position live.