Option traders brace for Google swing after earnings

By Angela Moon

NEW YORK (BestGrowthStock) – Options investors expect Google Inc (Read more about Google Stock Analysis) (GOOG.O: ) shares to move higher after earnings are announced after the bell on Thursday.

Heavy activity in a number of April strikes, which expire on Friday after the close, suggest investors are looking for a swing of 3 percent to 4 percent in the stock on Friday.

Google’s stock and its options are often volatile when the Internet search giant reports earnings because the report has tended to come just before monthly options expiration.

“April options are expiring soon and to see this kind of volume in the front month … all the activity is to capitalize on what the earnings are going to show,” said Randy Frederick, director of trading and derivatives at the Schwab Center for Financial Research in Austin, Texas.

Google shares were up 1.2 percent at $596.24 in afternoon Nasdaq trade. The stock is down more than 5 percent so far this year, underperforming the Nasdaq, which is up 7 percent since the beginning of 2010.

According to Reuters data, the April $600 call strike traded 9,315 times against open interest of 23,766. By mid-afternoon, the call strike fetched $10.30 per contract after hitting a high of $11.70.

The rich premium suggests that options investors expect the stock to move up to about $612 per share, said Scott Fullman, director of derivative investment strategy at WJB Capital Group.

By mid-afternoon, option traders exchanged about 104,000 Google contracts, more than their average daily turnover, according to data from option analytics firm Trade Alert.

Wall Street expects Google to report first-quarter earnings of $6.60 per share, up from $5.16 in the year-earlier period, according to Thomson Reuters I/B/E/S.

The StarMine SmartEstimate, which weights analyst projections based on their track record, expects slightly higher earnings of $6.61 earnings per share. Google has beaten estimates for six consecutive quarters.

Investors are concerned that Google’s withdrawal from China and growing regulatory and legal challenges may overshadow improvements in the Internet search giant’s core business.

Stock Market Money

(Reporting by Angela Moon; additional reporting by Doris Frankel in Chicago; editing by Jeffrey Benkoe)

Option traders brace for Google swing after earnings