FREE GOOG trade for August
GOOG is the king of all stocks and 900 lb heavy duty boulder of a stock. It is far more difficult to trade these 900 dollar stocks for many of us. Today I couldn’t pull the trigger with Peter Reznicek of ShadowTrader.net Host as he skillfully traded GOOG at the break out above 900. If you look at it 100 shares cost $90,000 and that is a substantial amount to pull the trigger, for most of the traders out there. However Peter did a great job of lifting 2.5 points out with only 2 point stop loss.
But as option traders we can do a lot if we let time and probability work in our favor for longer durations and time frames. It also utilizes a fraction of cost to do the same. Therefore I devised this trade and you can do that too. This trade only costs $7000 compared to $90,000 but carries the risk of longer time frames.
GOOG put spread posted 08/01/13 10:13 PST
Sell 7 GOOG August 850 ( Weeklies expiring in 29 days) puts
Buy 7 GOOG August 840 ( Weeklies expiring in 29 days) puts = .95 credit
GOOG is oversold and the stochastics are moving up. It cleared 900 level with the market and if it stays above 900 profits should follow. These are are weekly options out 29 days because there is not enough premium in the regular options with 15 days left. One can scale the number of contracts in or out. GOOG target around 928 the previous highs. Click to enlarge graph.
The risk of the trade is is the margin requirement of $7000 and the profit is limited to the credit, but the probability of expiring out of the money is 85% in 29 days. This is not to say that it will always do that. The trade is below the 50 day Moving average and below 100 day moving average.
IF GOOG drops below 890-885 area the trade can be closed with a small loss.