Gaga For Google

For tech fans, and even casual investors, few events pique interest like Google earnings (except perhaps, an "Options Action" doubleheader ... you never know, it could happen). After all, it is not hyperbole to say that Google IS the Internet. But while the excitement surrounding its earnings is a virtual cause celebre for equity investors, it's not exactly a biggie for options traders. Reasons for that: the huge cost outlay for the options, and the overall liquidity surrounding the name in the options pits.

Still, the options market has more or less nailed the percentage move for the stock over the last couple of earnings, so checking to see what options traders are expecting is useful.

According to Dan Nathan, Chief Options Strategist at Phoenix Partners Group and the newest star of "Options Action," at-the-money puts and calls imply about an 7.5% move for the Internet behemoth tomorrow. That's more or less in-line with past moves over the last 8 quarters.

Google has been on a tear since its last earnings, gaining over a quarter of its value in that time. And heading into the close today, the stock is heading higher. When it reports after the bell today, analysts will be focused on top-line growth, with the search giant expected to post a sequential decline in revenue. Another catalyst: cost controls. "Investors will want to know about their fiscal discipline," said Sameet Sinha, equity analyst over at JMP Securities (Outperform). "All those chefs and food cost money and hit the bottom-line," Sinha added, referring to the fabulous perks that being a "Googler" entails.

With the stock at a three-month high, prudence might dictate taking some profits, or at least using options to lock in some gains.

One strategy: buying what's called a risk reversal, where an investor sells one call and uses the proceeds to purchase a downside put. One trade Nathan is thinking about: selling the April 420 Call for $3.80 and buying the April 360 Put for $4.20. "You're paying .40 to be protected below $359.60, or ~8%, but you still have upside to $419.6, or ~8% on expiration this Friday. That's more or less the expected move on the stock," said Nathan.

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