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Monday's 2.2% pop for Google Inc (NASDAQ:GOOG) had call players circling, with roughly 42,000 contracts changing hands on the day. By comparison, around 30,000 puts were exchanged. However, not all of the day's activity was of the bullish variety. Nearly 3,100 of GOOG's weekly 5/3 830-strike calls crossed the tape on both the ask and the bid side of the aisle, and open interest rose overnight, pointing to a mix of both buy- and sell-to-open activity, respectively.
The volume-weighted average price (VWAP) for the out-of-the-money calls was $2.53. For the call buyers, these options will become profitable with each step north of $832.53 (strike price plus the VWAP) Google takes through Friday's close, when the short-term options expire. This breakeven mark represents expected upside of 1.5% from the stock's current perch at $820.40. Meanwhile, the call sellers will be able to retain the full potential reward -- which is equivalent to the net credit received -- as long as GOOG finishes the week south of the $830 mark. This could also be part of a larger covered-call strategy, in which GOOG shareholders are looking to generate a little extra income in the near term.
Delving deeper into the data, it appears that investors may have been protecting their portfolios long before yesterday's session, although with puts, and not calls. Despite GOOG's roughly 36% year-over-year advance, the stock's 50-day International Securities Exchange (ISE)/Chicago Board Options Exchange (CBOE)/NASDAQ OMX PHLX (PHLX) put/call volume ratio of 0.89 ranks higher than 85% of similar readings taken in the past year. In other words, puts have been bought to open over calls at an accelerated clip in recent months.
Echoing this trend is the equity's Schaeffer's put/call open interest ratio (SOIR) of 1.08. Not only does this show that put open interest outweighs call open interest among options slated to expire in three months or less, but it ranks in the 86th percentile of its annual range. Simply stated, short-term speculators have been more put-heavy toward Google just 14% of the time within the last year.
As mentioned, Google Inc (NASDAQ:GOOG) has had a stellar run on the charts over the past 52 weeks. However, after hitting a record peak of $844 on March 6, the equity entered a period of consolidation, but was able to find support atop its 20-week moving average. GOOG managed to take a solid bounce off this rising trendline, and is now trading just 2.6% below its all-time peak.