GOOG bubble

I wrote a straddle on goog this past Tuesday for 6jan400 and hedged outside:

short:
6jan400 call @ 2000/contract
6jan400 put @ 2440/contract

credit: 4440

long:
6jan350 put @ 600/contract
6jan450 call @ 670/contract

debit: 1270

Net: $3070/straddle w/hedge

If I don't close the hedge option, my max loss on the deal is about $1k/contract with a max gain of $3000.

Obviously I have a +/- $30 cushion on the strike.

However, if the stock moves close to either hedge I close out the hedge option, pocket the $$$, and long/short the stock to hedge my open short option.

You need about 20k in cash/fully-paid securities/sma to cover the margin on one contract, but you can make a nice return on your $20k doing so. It's scalable too...finding a few hundred shares of Goog isn't hard. WFMI, CME, MTB, CI are other quality short straddle plays for you to look at. Do this 10 times and year and you do the math!

* look at the chart on MTB and tell me you can't make money selling 105 straddles!:D :D
 
You don't want to be short and wrong with options!:eek:

You don't need to go for the home run, just go for doubles and singles 75% of the time. Instead of striking out, walk or hit the sacrifice fly! :D

Quote from SethArb:

hopefully that poster has heard of "covered calls "

:p
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my fav search is dogpile but how many people know about it compare to google, as an aside, we found a doctor thru dogpile and on the first visit the doctor casually asked how did we find him so we told him, I found you in dogpile search, he was not amused, ok back to google, it has a bright future ahead as I see the next generation will use it as their primary tool for decision making and with that ET also has bright future since if you search anything about trading there is always a hit on ET and with the news msn charges 1 mil for a link a a mere 24 hour, ET is valuable piece of real estate indeed.
 
Quote from Enfinity:

I wrote a straddle on goog this past Tuesday for 6jan400 and hedged outside:

short:
6jan400 call @ 2000/contract
6jan400 put @ 2440/contract

credit: 4440

long:
6jan350 put @ 600/contract
6jan450 call @ 670/contract

debit: 1270

Net: $3070/straddle w/hedge

If I don't close the hedge option, my max loss on the deal is about $1k/contract with a max gain of $3000.

Obviously I have a +/- $30 cushion on the strike.

However, if the stock moves close to either hedge I close out the hedge option, pocket the $$$, and long/short the stock to hedge my open short option.

You need about 20k in cash/fully-paid securities/sma to cover the margin on one contract, but you can make a nice return on your $20k doing so. It's scalable too...finding a few hundred shares of Goog isn't hard. WFMI, CME, MTB, CI are other quality short straddle plays for you to look at. Do this 10 times and year and you do the math!

* look at the chart on MTB and tell me you can't make money selling 105 straddles!:D :D
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I don't trade options, but is this called a butterfly? selling the body, and buying the wings? Maximum profit is acheived if the stock does not move?

However, you mention closing a long wing and replacing it with an outright equity long/short to maintain the hedge. I don't see how this can replace a long put or call hedge with more profit and the same risk profile with an outright long/short in the underlieng?

I can see cover the short body (long/short) and pocketing profits while leaving the possibility the underlieing moves in the opposite direction and profit is realized on the other short position also.

Can you help me out here?

thanx
 
I don't think GOOG is in a bubble when comparing it to its comparable companies fundamentally.

Google
47.5x next year's earnings
33% Growth Next 5 Years

Yahoo
55.3x next year's earnings
29% growth next 5 years

Ebay
46x next year's earnings
30% growth next 5 years

I think when merely looking at a company's market cap, it is difficult to call bubbles...especially when considering YHOO is MORE EXPENSIVE on some fundamental metrics.
 
YHOO went public in April 1996 and closed the first day around $33/share.

... that is ~ $1200/share today factor out the splits.

... would have been a terrible short.
 
Quote from HorsesToTrading:

I don't think GOOG is in a bubble when comparing it to its comparable companies fundamentally.

Google
47.5x next year's earnings
33% Growth Next 5 Years

Yahoo
55.3x next year's earnings
29% growth next 5 years

Ebay
46x next year's earnings
30% growth next 5 years

I think when merely looking at a company's market cap, it is difficult to call bubbles...especially when considering YHOO is MORE EXPENSIVE on some fundamental metrics.
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I completely agree. People see goog's high pe, but on a forward pe basis its cheaper than many others. Also considering goog has a better record (albiet only in the past year) of beating earnings estimates, one could conclude they have a better chance of meeting those forward estimates also.

The fact is google has gone from 2 guys & a thesis paper to the 30th largest company within 8 years. Thats incredible, and it doesn't happen unless they know what they're doing. That said I dont see google going up 10fold in the next 3 years, but market beating returns is very likely in my opinion in the next 3 years.

The same people who are calling goog a bubble were calling it a bubble when it ipo'd, and so far everyone whose called it a bubble has been wrong (even if you think goog deserves a p/e of 50 or 40, that would've still been a very successful return since ipo).
 
I think when merely looking at a company's market cap, it is difficult to call bubbles...especially when considering YHOO is MORE EXPENSIVE on some fundamental metrics. [/B][/QUOTE]

The fundamentals of internet advertising are undergoing a major change as we speak. In the very near future revenues generated via search advertising are going to be overshadowed by increased spending for branded advertising - flashy banners on web pages. This is where entities like yahoo, microsoft and ask jeeves (IACI) stand to benefit and will probably divert a big chunk of google's revenues their way. However, google can circumvent this by indulging in on the fly innovation so to speak wherein it also starts to provide branded advertising on its site in addition to advertising revenues generated from pure search which is its strong point and where it is well ahead of everybody else. Having said that google could well find itself at the receiving end if it does not take quick and immediate action to get on par with the other major players in this highly competitive sector
 
I don't think many people understand what Google is all about. They intend to they control information flow on the web like Msft controlls the desktop.

Google has a chance to be bigger and more dominate then msft is. Don't underestimate what this company is all about. It is not just web search.

They will be the first $Trillion dollar company in less then 5 more years.

I don't own any and am too chicken to buy it here. Maybe if it get to $200 that would be a place to buy.


John
 
Quote from jficquette:

I don't think many people understand what Google is all about. They intend to they control information flow on the web like Msft controlls the desktop.

Google has a chance to be bigger and more dominate then msft is. Don't underestimate what this company is all about. It is not just web search.

They will be the first $Trillion dollar company in less then 5 more years.

I don't own any and am too chicken to buy it here. Maybe if it get to $200 that would be a place to buy.


John
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You don't understand what Google is all about. 1st you say they will be a 1 Trillion dollar company and then you say $200 would be the place to buy.

You are flip-flopping.
 
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