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A Technical Milestone for Google Inc (GOOG) Entices Options Players

Near-term option volume spikes on GOOG

by 12/20/2013 12:54 PM
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Option Brief: Google Inc (NASDAQ:GOOG) reached a record high of $1,099.45 today, despite news that the European Commission rejected the company's latest proposal in an antitrust dispute. Meanwhile, the stock's trading pits are teeming with options activity, as roughly 64,000 contracts have crossed the tape so far -- almost double the intraday norm. Also of note, the security's 30-day, at-the-money implied volatility (IV) has climbed 1.1 percentage points, or 6.6%, to rest at 18.5%.

Last-minute front-month traders are responsible for much of the action, considering nine out of GOOG's 10 most active strikes are in the December series of options, which expire at today's close. Still, some speculators are giving their positions a little more time to play out, as evidenced by the 1,968 calls traded at the January 2014 1,100 strike.

Since the majority of these contracts changed hands at the ask price -- and implied volatility has ticked slightly higher at this strike -- it's possible that new bullish positions were added here. In this scenario, the call buyers are hoping GOOG will muscle north of $1,100 by the close on Jan. 17, when these options expire. Given the call's delta of 0.49, the market forecasts a 49% chance of such a move coming to fruition.

Technically speaking, Google Inc (NASDAQ:GOOG) is up more than 55% year-to-date, and outshined the broader S&P 500 Index (SPX) by north of 16 percentage points during the most recent three-month time frame. At last check, the search engine giant was 1.1% higher to trade at $1,098.02.


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