SteadyOptions is an options trading forum where you can find solutions from top options traders. Join Us!

We’ve all been there… researching options strategies and unable to find the answers we’re looking for. SteadyOptions has your solution.

Google killed the options sellers.. again


Last year I wrote an article for Seeking Alpha Google Options Underestimated The Risk Again. Looks like history repeats itself. On Thursday Google reported blowout quarter and the stock rallied the next day a whopping 122 points (13.8%). The options markets implied a 33 points move.

Those who purchased the straddle a day before earnings more than tripled their money. However, for each buyer there is a seller. Those who sold those options (thinking that they are overpriced) got absolutely killed. They have lost almost $9,000 per contract. Well, of course not all of them - some of them sold those options as part of a hedge or maybe more complex trade, but you get the point.

 

So what are the lessons here?

 

First, NEVER ever sell naked options. Especially not before earnings. Especially not on stocks like GOOG, NFLX etc. that have a history of big moves. If you insist to sell premium, hedge yourself with further OTM options (creating an Iron Condor). Those who did it with Google, still lost 100% of the margin, but at least they knew their maximum risk in advance.

 

Second, be aware that earnings are absolutely unpredictable. If you decide to play earnings, do it only with a small portion of your capital and pre-defined risk.

 

Overall, options tend to be overpriced before earnings, and selling them with defined risk should produce good results over time - but you should always limit your loss and position sizing knowing that from time to time, there will be surprises. However, not all options are overpriced. There are some exceptions, and Google is one of them. Statistically, as I showed in my article, buying Google straddle a day before earnings would produce pretty good results.

 

Options trading can be very lucrative, but you should always remember about the risks. And if you are playing earnings, the only risk management tool you have is position sizing.

 

By the way, Google was not the only stock this week when the options market was terribly wrong about the potential move. Chipotle Mexican Grill (CMG) straddle was pricing a $28 move - in reality, the stock moved $70. Sandisk (SNDK) also moved almost double than the implied move. If you still believe that the markets are efficient, you live in a fantasy land.

What Is SteadyOptions?

12 Years CAGR of 114.5%

Full Trading Plan

Complete Portfolio Approach

Real-time trade sharing: entry, exit, and adjustments

Diversified Options Strategies

Exclusive Community Forum

Steady And Consistent Gains

High Quality Education

Risk Management, Portfolio Size

Performance based on real fills

Subscribe to SteadyOptions now and experience the full power of options trading!
Subscribe

Non-directional Options Strategies

10-15 trade Ideas Per Month

Targets 5-7% Monthly Net Return

Visit our Education Center

Recent Articles

Articles

  • SPX vs SPY Options: Which One Should You Trade? (2026 Guide)

    Both SPX and SPY options give you exposure to the S&P 500. They track the same 500 stocks, move nearly tick-for-tick, and offer the same core strategies — credit spreads, iron condors, butterflies, and 0DTE trades. Yet the two products settle differently, are taxed differently, and carry very different assignment risks.

    By krisbee,

    • 0 comments
    • 2402 views
  • Strike Price Effects Or Pinning Revisted

    Loyal readers of this blog will recall my post from 2019 “Pinning Down the ‘Option Pinning’”. If you have not heard of pinning have a look at that article as – spoiler – everything in it as well as Jeff Augen’s observations in his books which are referenced is still valid.

    By TrustyJules,

    • 0 comments
    • 1151 views
  • Could This Strategy Be The Holy Grail Of Investing?

    This is a reprint of my Seeking Alpha article from 2013. If you have SA subscription, you can read the full article including hundreds of comments here. For the record, the strategy implementation has changed since then, but the principle remains the same. You can read more here

    By Kim,

    • 6 comments
    • 4776 views
  • Why Traders Need Brokers: An Important Alliance

    Trading the financial markets can be rewarding, but it also offers its fair share of complexities and obstacles. When faced with thousands of financial instruments, fluctuating markets, and a range of platforms at their disposal, traders can feel overwhelmed.

    By Kim,

    • 0 comments
    • 1802 views
  • 8 Tips to Help New Investors Build Up Their Wealth and Manage Risks

    Investing your money is arguably the most effective way to build wealth, but it’s not some magic get-rich-quick scheme. It comes with risk. If you jump into investing, especially if you’re considering investing in cryptocurrency and treat it like gambling, the chances are that you’ll see the same results as gambling.

    By Kim,

    • 0 comments
    • 1190 views
  • No Really, It Will Be Different This Time Around!

    Whilst the Palantir CEO is carping on about the fact that the iPhone is the crowning achievement of civilization and nothing has changed our lives more, us investors are left wondering if all the money that is going into the future grand vista of Big Tech really is the proverbial land of milk and honey.

    By TrustyJules,

    • 0 comments
    • 2799 views
  • Is Bitcoin Worth Buying in 2026?

    If you want the answer to whether or not you should buy Bitcoin, you're in the right place! In recent years, the world has been introduced to an entirely new peer-to-peer currency that's made waves all over the globe. The cryptocurrency known as Bitcoin has been available since 2009, but it's been garnering worldwide attention ever since early 2018.

    By Kim,

    • 0 comments
    • 3087 views
  • Cryptocurrency Red Flags: Staying Smart As A Newbie Investor

    It might not surprise you to find out that the world of cryptocurrency has quite a few red flags in it. It’s easy to make a mistake as a newbie trader to begin with, but that’s not where the issues end. From malicious actors to shady trading platforms, there’s a lot you need to be aware of to both protect your investments and your identity. 

     

    By Kim,

    • 0 comments
    • 2565 views
  • From Wealth Building to Wealth Preserving: How to Diversify After You’ve Made It

    There's a time when the pursuit of success will change. Your hunger for growth in revenue, in scaling a company, or in stacking investments will begin to wane. You'll look at your account and see that you've crossed the line. At this point, you're no longer focused on proving to yourself that you can create wealth. Now you're thinking about making sure that wealth remains intact. This isn't a fear-based change; it's a maturity-based one. 

    By Kim,

    • 0 comments
    • 3502 views
  • Early Assignment Can Be a Gift

    For reasons that I don’t understand many rookie option traders fear being assigned an exercise notice on a previously sold option. In fact, assignment notice can be a free gift. That gift is likely to be worthless, but on occasion it turns out to be a very welcome surprise.

     

    By Mark Wolfinger,

    • 0 comments
    • 18179 views

  • Upvote 1
  Report Article


We want to hear from you!


Great article and good advice!

 

I agree that markets are inefficient.  However, I don't think this particular example disproves market efficiency.  The efficient-market hypothesis (in its weak form) only argues that market prices reflect all publicly available information.  Since the earnings results are not publicly known prior to the announcement, the prices cannot reflect that information until after the announcement.  So, even if the markets were weak-form efficient (which they aren't), you could still have an earnings surprise.

Share this comment


Link to comment
Share on other sites



Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.
Note: Your post will require moderator approval before it will be visible.

Guest
Add a comment...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...