Unusual Options Activity: Google (GOOGL)

Search engine giant Google (GOOGL) popped higher last week following an announcement on the company’s investments in artificial intelligence. One trader is betting that shares will come down following the news.

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  • That’s based on the July $120 puts. With 67 days until expiration, 16,784 contracts traded compared to a prior open interest of 187, for a 90-fold jump in volume on the trade. The buyer of the puts paid $6.75 to make the bearish bet.

    Shares recently traded for about $117, so the option is already about $3.00 in-the-money. The jump higher also took shares close to their 52-week high of $122.43.

    Google now trades essentially flat over the past year. While revenues have slowed amid a drop in online advertising, google still managed to pull in over $284 billion in revenue last year. And profit margins remain healthy at 21 percent.

    Action to take: Shares are worth buying on a pullback with the long-term in mind. At current prices, a drop under $110 would be a reasonable entry point. But investors are unlikely to get a dividend out of Google for some time.

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  • For traders, the short-term puts look reasonable given the jump higher. It’s likely that shares will try to close the gap higher made on Thursday in the coming weeks. That could lead to mid-double-digit returns on the July $120 puts.


    Disclosure: The author of this article has a position in the company mentioned here, but does not intend to trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.