Buy the April 610/660 call spread for $25
expired today worthless for loss of $2500
13 apr - i sent brian a tweet today to see what he is doing with this trade since i have not seen any tweets from him regarding what to do..ie, hold, take profits.. im sure the loyal CNBC viewers would like some transparency and not be left hanging.. here is the response..i find it kind of odd to put on a trade for earnings but not hold it thru earnings and not say anything on-air or twitter.
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5apr-
brian had a trade on fastmoney show tonight for an earnings play for google. here is the video of his segment FM segment . Google reports on 12 apr now, so it looks like a week earlier than the tentative date previously floating out there. as of now the options are pricing in about at 36ish move for the weekly options and about a 40point move for the April options. brians trade is a Call Spread with stock at about 633:
Buy the April 610 call for 36.00
Sell the April 660 call for 11.00
total debit $25 ($2500 for one lot), max profit is $25 ($2500). stock needs to close at 635 or higher to break even at opex.
his comment that it just needs to be above 635 to make money is accurate. flip side that is starts to lose money below 635 is equally true. also said he would be stopped out at 610. also true, another word for that is max loss. Brian has a bullish thesis.
My take is risking $2500 to make $2500 is not a good risk reward. who knows what will happen with earnings, options market expects a move 36bucks in either direction so risking 2500 to make 2500 seems like a coin flip. i also say that if you are going to guess, then guess cheap. $2500 is not a cheap guess if it disappoints and trades down that full 36 to 600.
instead with a bullish thesis and an assumption that the options market has it priced correctly i would look for a lower cost bet. using my amateur fibonacci, looks like the 127 extension gets us to about 675ish, options pricing in move up to about 668 as of today and there is some resistence at 670 from jan.
i would look at a weekly monthly call calender
Sell the Weekly 670 call for 6.80
Buy the Apr 670 call for about 8.30
total debit about 1.50 . trademonster analyse tab shows about a profit of $900 if closes at 660 (brians max profit level) or a $1300 profit if 670 close on weekly opex. thats best guess right now. and thats just for a one lot $150 risk.. so you could buy a few lots. i would look to put this on day of earnings so ideally the weekly options gain in value from IV increase and can make this spread a bit cheaper.
brian defines his risk and so does mine, but i prefer to guess cheaper by getting 2-3 of these calender spreads vs paying $2500 for a call spread.
a twofer tonight..if you think options have an upside move priced correctly to about 668, look at:
Weekly 660/670/680 call butterfly.. quotes after hours show bid/ask at 0/1.20 so i would try to get for .75 to start.. close at 670 gets you max profit of over $900.
