Last quarter GOOG’s earnings were leaked. This lead to unsure and volatile action, price’s reaction to this news was net bearish. Investors are hoping this doesn’t happen again. Of the last nine observations, excluding last quarter timing error, post EPS activity is mixed. In most of the sample set, six of the nine observations, GOOG gapped and pinned on expiration at a large round number. In the other observations, GOOG gapped, but then filled or reversed into said gap.
GOOG was around the $750 level before last quarter’s report. This report proved to be the catalyst for further downside action. After the report, GOOG shares came down to test the 200-day moving average. On this day specifically, shares formed a bottoming tail hammer and the following day printed a nice confirmation bar…shares have been in rally mode since.
The ATM (at the money) weekly $705 straddle (lifting the offer) is at about $42.00 (5.9% of stock). It is easy to calculate break evens on the straddle. At last check the stock was around $705; $747.00 & $663.00 are the respective upper and lower breakeven. Straddle traders need to be aware of fast weekly time decay and the IV crush post earnings. Implied volatility (IV) is a measure of risk, supply and demand, relative price, and an input into theoretical models for options.