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Trader bets on big Google move ahead of earnings

Google's Class C shares are down for the month, but one trader has made a bet that they will rally after the company reports its first-quarter earnings after the bell Thursday.

Specifically, when call volume ran three times that of puts in the Google's Class C shares, a trader bought 1,800 contracts of the 575-strike calls expiring on May 15 at a price of $3.70 each. As each contract controls 100 shares, that means the trader is betting $666,000 that Google's Class C shares will trade above $578.70 by mid-May. That would be a gain of 7.3 percent from Wednesday's close. Calls are bullish wagers allowing purchasers the right to buy a stock at a given price by a set date.

According to Dan Nathan, co-founder of RiskReversal.com, the trader is betting Google will exceed market expectations.

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"The implied move in the options market is about 4 percent," said Nathan. "That's how much it has moved on average over the last four quarters."

Since splitting off from Class A shares a little over a year ago, Google's Class C shares, which have no voting rights, are down 3 percent. However, that's better than the performance of Class A shares, which are down 6.5 percent since the split.

Nathan said the buyer of the 575-strike calls is probably an owner of the shares adding a little more exposure before Google's earnings come out.

"You don't really see a lot of big chunky directional trades in Google, especially in front of an earnings event," Nathan said. "It's likely a long holder of Google looking for some leverage into a potentially volatile event. If you get that move higher, you get the direction right, and you get the magnitude of the move right in a big way, these calls could add a lot of leverage to an existing long position."

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