is google really worth $300-350 a share?

Discussion in 'Trading' started by jasonjm, Jun 7, 2005.

  1. jasonjm


    I have been waiting to short it recently, but the moment seems very strong, sO I am sitting it out

    what you guys think?

    man looking at jan 06 option prices, 40 bucks for at the money strikes? lol

    everthing about this stock is crazy lol

    maybe its best to buy the stock and sell covered calls lol
  2. If, unluckily, this price area becomes the top, then long stock + short call is a bad strategy.

    That strategy is very good for cyclical stocks and commodities though.
  3. Uh, pardon me. What would you like an ATM strike to be on a $300 volitile stock?
    Going out 6 months no less.

    Hard to believe I can't make a million a week trading against this level of sophistication.
  4. GOOGLE, like any stock, is only worth what people are willing to pay for it...

    As for shorting it, why now when the path of least resistance is evidently up?

    I would wait until the path of least resistance turns down a bit before shorting...but this of course is just my opinion..
  5. Chagi


    You know, I just finished reading "Reminiscences of a Stock Operator" again, and I really like the "path of least resistance" phrase, I think it's a very intuitive way of stating that a stock is usually more likely to move in one direction than another.
  6. sunnie


    Examining your options
    Commentary: Why it's not time to short Google
    By David Nassar
    Last Update: 7:23 PM ET June 7, 2005

    Now for the real meat of this week's story -- Google (GOOG: news, chart, profile) . Yes, it is time to address the question -- where does it go from here? The answer is -- who knows for sure, but I would rather be long and wrong than short and wrong. That means that short positions are far more likely to get run over and hurt than long positions. To short Google here is simply the riskiest thing you could do. Does that mean you may not catch a nice 5-10 point retracement? No. But that would be luck not skill. The momentum of this locomotive is only building, sure to run over any track walkers who think they can hand pick the turn. In fact, I think the only way to play this monster is on big point swings with a trend following approach. This means options are the tool to use here, and not just because of the leverage it provides, but more because of the large swings inherent of Google.

    This raises the topic of premium and cost of option contracts on Google -- so don't expect to ride this monster without paying. Extrinsic factors to premium are like insurance policies -- the greater the risk and volatility, the greater the premium. This includes historical and implied volatility, time, and of course the strike price one chooses. In terms of strike prices, like any option, expect to pay dearly for "at the money" options.

    For example, if we buy call options (long the market in Google) for July $290 strikes while the current market in Google is $293 per share, we have $3 of intrinsic value. Any difference we pay for these call options represents the extrinsic value, or the price of volatility and time (without getting too deep into the topic). If the July $290 strike calls are selling for $18, we are paying $15 of extrinsic value beyond the intrinsic value of $3. Therefore, in order to net any gain, we would need GOOG to be trading at $308 ($290 + $18) or better by the third Friday of July (option expiration).

    If a $15 premium (extrinsic value) seems high, remember, this is the price you pay to play with greed. Additionally, one must accept that as time erodes so will the premium, and at an accelerated pace. Therefore, with options, we are essentially required to not only be correct about the trend's directions, but also the reach of the given trend within a certain timeframe.

    This stated, the reasons one would trade the options instead of buying the underlying stock are three fold. One, we don't need to tie up nearly as much capital. Two, we only pay for the option to the extent we are willing to lose it (assuming no stops). Third, we give the stock the room it needs to move in trend without having to perfectly time the entry (of course, if the stock does trend lower, the call buyer will be wrong and stands to lose the entire $18 assuming no stops. In this regard, the risk is at least limited to $18 as opposed to the stock dropping by much more).

    Perhaps the real lesson here is to avoid chasing greed. While Google is sexy and a headliner -- it is an account killer and no place for the amateur. To dance with this monster you had better understand the accompanying risk that goes with it. If you play it with stock, use small positions and set wide stops because this stock will need room to move. If you play it with options, only play with what you are willing to lose and understand several factors must work to your advantage within a defined time horizon in order to prosper.

    Regardless, greed has a high price of admission and perhaps the greatest lesson here is to understand why other stocks away from the spotlight can be the best places to hunt.

    So why bring up Google? Because everyone seems to want to know about it and while this column only speaks to a few ways to look at it within the many scenarios available, no scenario can eliminate the core elements of the market -- greed, fear and hope. The best we can do is to be aware these emotions exist and understand how to best strategize our trading techniques.

    complete article at{09597FEF-6FD2-477D-90F5-1C88AA8EFD22}
  7. lol, everyone and their silly cliches and "words of wisdom"...
  8. You saying there's no wisdom here on ET?

    They've been bashing GOOG since it opened at 100. That's wisdom.
  9. Driehaus


    Who said it`s a $350 stock? Henry Blodget?
  10. zdreg


    #10     Jun 8, 2005