Last week I was in beautiful Huntington Beach, CA with Dan Sheridan presenting an options seminar to our typical crowd of knowledge seeking baby boomers. I spent some time talking about the expected movement of an underlying stock or index through standard deviation. Nice little formula but it involves some math and a #2 pencil. Instead I promoted the quicker floor trader version of looking at options to see what the market is implying for the expected movement of the underlying.
With Google (GOOG) earnings coming out today, let’s take a traders peek at the July at-the-money options with only a day to go until expiration. The fair value of the July 905 call and put add up to about $38 Therefore, based upon implied volatility, we can expect about a $38 move in GOOG either up or down. So sorry but I can’t help you with direction. So put your trading jackets on because you have plenty of option strategies to choose from: http://www.cboe.com/Strategies/WeeklyStrategy.aspx Sell a Strangle just outside the expected movement of GOOG? Sell out-of-the-money puts for income with the possibility of purchasing GOOG at a lower price? Sell Covered Calls trading standard or mini options with a target sale price in mind? Put your trade on and buckle-up!
As for the baby boomers who are diving into the options market? You can meet a few of them here http://nbr.com/2013/07/12/baby-boomers-dive-into-options-market/ with a nice piece by the delightful @JaneWells of CNBC who paid us a visit in Huntington Beach.