Google Inc. (NASDAQ: GOOG) shares are trading higher after the company said in a blog post last night that it bid in the recent government spectrum auction in an effort to open up the airwaves to outside Internet devices. The company also said it planned on bidding in the next wireless spectrum auction in an effort to improve its own wireless business. GOOG is currently developing a mobile phone software platform, and hopes to "make the wireless world look much more like the open platform of the Internet," according to a company statement. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on GOOG.After hitting a one-year high of $747.24 in November, the stock hit a one-year low of $412.11 in March. GOOG opened this morning at $457.01. So far today the stock has hit a low of $456.20 and a high of $471.99. As of 12:45, GOOG is trading at $470.01, up $14.89 (3.2%). The chart for GOOG looks bearish but improving slightly, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.
For a bullish hedged play on this stock, I would consider an April bull-put credit spread below the $400 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 5.3% return in just two weeks as long as GOOG is above $400 at April expiration. Google would have to fall by more than 15% before we would start to lose money. Learn more about this type of trade here.
GOOG hasn't been below $410 at all in the past year and has shown support around $440 recently. This trade could be risky if the company's earnings (due out on 4/17) disappoint, but even if that happens, this position could be protected by the support the stock might find around $410, where it bottomed out last month.
Brent Archer is an options analyst and writer at Investors Observer.
DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in GOOG.
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Reader Comments (Page 1 of 1)
4-04-2008 @ 4:32PM
Barbara said...
Google always is trying to amaze its users and the general public with new services or products. For this reason, its marketing department works jointly with its financial department to assess and evaluate which announcments produce a positive effect in its stocks.
How do I know this? Information is power, and this blog is an excellent source of information. You can also see a very useful source of information on stock movements at this link, I hope it will also help out someone out there as much as it did for me.
http://www.gnutrade.com/daily_update_guide_on_world_market_movements_indices_bonds_forex_commodities
4-04-2008 @ 4:39PM
NewsVisual said...
Google could be getting into the wireless market too late. The competition is fierce. Apple is far ahead with its iPhone. Sprint will be a rival too. In an effort to capture some lost marketshare from the iPhone by Apple Inc and its telecom rival AT&T Inc, Sprint announced on Tuesday that it was teaming up with cell phone-maker Samsung to launch their own smart phone, which will flaunt many of the same features as the rival iPhone. Sprint’s new cell phone will be called the Samsung Instinct. Like the deal of its rivals, Sprint will have an exclusive servicing relationship with the Instinct. Despite this new product initiative by the two companies, however, investors will wonder whether it’s enough to help Sprint reverse its mass desertions by customers to other carriers and its huge earnings losses. Investors will also question whether Sprint has a strategic plan in place to help bring around the company’s turnaround. But this will also leave Google in the dust if it tries to enter the cell-phone market at this late period.