August 14 - Google Trade Setup

This trade is a bit out of character as far as following usual signals for my trades. But I have been following Google's stock for a while and believe that I'm familiar with its trading patterns. Given that there are no earnings news or other headlines, Google trades with the market - rising in an upmarket and falling in a down day.

Looking at the daily Google chart, it is strong to the upside. BUT I feel that there may be some loss of steam from the bulls. The trading range has narrowed and the climb has slowed.


Volume has declined and the MACD is ticking down while the price diverges to the upside. The markets are over-bought and a pullback is in order. Possibly a retreat to $440 for Google. I want to make use of this but I do not want to stand in front of a charging bull by shorting this stock.

For this purpose I will sell $500 calls for September on Google. I have sold numerous calls at the strike price of $500/share for September expiry for a premium of $2.50/share.

I do not plan to hold these options until expiry, I will buy them back at around 80% profit - at around $0.50/share.

I do have a spot-loss set up for this, in case the trade goes against me. If the premium doubles to $5 I will buy them back at a loss.... Let's see how the markets act in the coming weeks.