Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

Where to Strike Google to Hit the Most Pins

By

Know where to find the largest open interest and the most volume.

PrintPRINT
Okay, let's start this whole pin look-off with Google (GOOG), just like Jimi Hendrix did 40 years ago at Woodstock.

Google is a great place to start, as an academic study last year showed it was the most likely stock in America to pin somewhere. And somewhere painful for options owners.



The chart above shows 30-day IV (in yellow) over the past 2 months. Remember: A good marker for a pin is a cycle-long volatility dip as it suggests market makers and other professionals are net owners of options paper. And they're the gang that hedges most aggressively, so if they own it, they're out there tightening the stock.

You can't see the dates here on this graph, but that big decline in IV was right at last month's expiration -- also the day after Google reported earnings. So we've essentially flatlined since then, neither here nor there if we're trying to guess who owns what. Google stock hasn't moved much either, so it's basically the nearby strikes that are in play. Open interest is on the low side. Looking at the nearby strikes, August 450 calls have the largest open interest and the most volume this week, so that, to me, seems like the most logical strike.

There's a site called Option Max-Pain Calculator that allows you to pop in a name and it will calculate the dollar value area where options owners would see the greatest loss of premium -- The Max Pain level. It shows Google with modestly more pain at 440 than 450.
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
PrintPRINT
 
Featured Videos

WHAT'S POPULAR IN THE VILLE