Option bulls took a shine to
) this morning, with the stock up 2.3% at $907.25 as of 11 a.m.
EDT, after touching a record high of $911.76 earlier. Within the
first 90 minutes of trading, GOOG saw roughly 55,000 calls change
hands -- nearly four times its average intraday call activity -- as
traders gamble on more upside this week.
Garnering the most attention have been the May 900 and 910 calls,
which have seen around 6,200 and 6,600 contracts cross the tape,
respectively. Most of the calls have traded on the ask side, and
volume has exceeded open interest at both strikes, underscoring our
theory of newly bought bullish bets.
By purchasing the 900-strike calls at a volume-weighted average
price (VWAP) of $9.45, the buyers' profit will increase the higher
GOOG soars beyond $909.45 (strike plus VWAP) through the end of the
week, when May-dated options expire. Meanwhile, the more ambitious
bulls bought the 910-strike calls at a VWAP of $5.15, indicating a
breakeven of $915.15. In either case, the maximum risk on the
purchase is the initial premium paid for the calls.
Bolstering Google and fueling today's call activity was a report
that the company signed licensing deals with
) and Universal Music Group, and will
soon launch a paid music service
to rival Spotify. In addition, traders are likely optimistic ahead
annual software developers' conference
, slated to kick off this morning in San Francisco. Last year at
the conference, the company unveiled Google Glass.
Whatever the motive, today's appetite for short-term calls runs
counter to the trend. In fact, Google's Schaeffer's put/call open
interest ratio (SOIR) stands at an annual high of 1.39, implying
that near-term traders haven't been
put-skewed during the past year.
This article by Andrea Kramer was originally published on
Schaeffer's Investment Research
Below, find some more great content from Schaeffer's Investment
Daily Game Plan - Bad Data? No Worries
Chartist Corner: Two Charts That Should Worry the
Bears Bet Against Live Nation Entertainment's (
) Positive Trendline