Google (NASDAQ:GOOG) offers highly targeted advertising solutions, global Internet search solutions through its own destination Internet site and intranet solutions via an enterprise search appliance. The company maintains an online index of Websites and other content, which it makes available freely to anyone with an Internet connection. Its automated search technology helps people obtain nearly instant access to relevant information from its vast online index. Google generates revenue by delivering relevant, cost-effective online advertising and businesses use the company's AdWords program to promote their products and services with targeted advertising. In addition, the thousands of third-party websites that comprise the Google Network use the company's software to deliver relevant ads that generate revenue and enhance the user experience.
This position was recommended by one of our long-time (OIN) readers and a quick review of GOOG's recent price history suggests it may have merit. The technical indications point to a decline in buying pressure and with quarterly earnings due after the April options expire, there appears to be few catalysts to drive the share value higher in the coming weeks. In addition, the near-term resistance area at the sold (call) strike price should provide some margin of safety in the event of future upside activity. Readers who can tolerate the (relatively) large moves in the underlying stock can benefit from its robust (OTM) option premiums. We recommend trading a smaller number of contracts (3-5) to limit the potential capital draw-down from this speculative spread. It will not be listed in the MCM Portfolio.
Fundamentals Chart Earnings Dates Analyst Ratings
PLAY (speculative - bearish/credit spread):
BUY CALL APR-210.00 GOU-DB OI=8255 ASK=$0.75
SELL CALL APR-200.00 GOU-DT OI=5334 BID=$1.45
INITIAL "NET-CREDIT" TARGET = $0.80-$0.90
POTENTIAL PROFIT (X 3 contracts) = $240
RETURN ON INVESTMENT (max) = 8%
COST BASIS = $200.80
LOSS-LIMIT/EXIT POINT = $196.50 (cons) - $199.25 (aggr)