Scott Redler: Low Expectations for Google Pay Off Big Time!

On Wednesday morning, I told Redler All-Access readers that I was looking at picking up GOOGL calls for earnings after it dropped on the DoJ News:

GOOGL is lower on the DoJ news. It reports Thursday after the close. It might be worth a look long if it can hold the $1130-$1132 area. I may pick up calls for earnings, but we’ll see.

 at 9:39 a.m. ET, I Tweeted to my Redler All-Access readers that I indeed got long $1,130 calls. 

On Thursday morning, I followed up with this message in my RAA Morning Note::

GOOGL: I bought $1130 calls while it was down yesterday. Expectations are very low. It needs to get and stay above $1160, and $1200 wouldn’t be out of the question, assuming the report is better than expected.

And Thursday after the close, GOOGL did indeed deliver, sending the stock up huge today.

The options closed at $31.50 yesterday, and opened at $100.88.

In actual dollar terms, that's a gain of $6,938 per lot overnight.

Here's the chart of the options:

I sold my calls right after the open today, when GOOGL was around $1,230ish.

I was a little early, because GOOGL got as high as $1,268.39 to fill a big gap! 

But, I'll take what I got.

The lessons here are simple:

1) I only take options into earnings because my risk is defined. Yes, the risk can be high but I manage it through my position sizing, and I'm willing to live with the consequences.

2) Sometimes, a negative news event can be a gift. Expectations for GOOGL were already low, and the DoJ news took them even lower. 

So what's next for GOOGL? 

As you can see on the chart below, there's still a long-term channel building.

There might be an opportunity to buy the stock soon, but I'll wait to see where gap support ends up.

P.S. Want my complete guide to moving averages?

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Positions Disclosure: As of July 26, 2019 at 10:10 a.m. ET, Scott J. Redler was long SYMC, TWTR, AMD, ETSY, LK, BAC, AMRN calls, UBER calls, GWPH calls, GLD calls, DIS calls, AMZN calls; is short NFLX, GLD calls, DIS calls