Options Trading News

February 5, 2013  Tue 12:21 PM CT

At least one trader apparently believes that Google will keep going after a big rally in the last year.

optionMONSTER's Heat Seeker tracking program detected a large bullish trade in the search giant, entailing the purchase of 1,000 January 2014 800 calls for $56.50 and the sale of an equal number of January 2014 900 calls for $23. That translates into a cost of $33.50.

The trade represents a $3.35 million bet that GOOG will reach $900 by early next year. If it does, the position will be worth $10 million--a profit of 199 percent. This strategy, know as a call vertical spread, risks much less capital than buying shares at current levels. (See our Education section)

GOOG is trading at $768.61 this afternoon, up 1.26 percent on the session and 29 percent in the last year. While its financial results have been mixed, investors continue to applaud its dominant online position and are hoping for better profit margins.

The shares are also attempting to push convincingly through their late-2007 peak of $747. Some chart watchers may expect a continued rally if this resistance level is broken.

Total option volume in the name so far today is already double its full-session average, with calls outnumbering puts by almost 2 to 1.
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As I stated in last week's article, a break out or a break down needs to have a couple things happen before it is considered a confirmed break out or break down. The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

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