ServiceNow Pumps Higher, Google Options in Play Today

April 23rd MTR Subscriber Data Tracker

Well we hope you took a look at ServiceNow (NOW) that we highlighted in our post yesterday. We looked at the at the money (ATM) strike breakevens which were priced at $61 expecting a 7.5% move. We apologize now that we highlighted the Put spread instead of the call spread, but hey you can’t get them all right.

However if you simply played the straddle, well, your up big time today as NOW is +14%, trading $926! Since the straddle yesterday was priced at $61 and using the $815 at the money strike meant you needed a move above $876 or below $754 to make money. Safe to say the straddle buyers were well rewarded with this one! We still won’t change our minds however for a better buy location in the high $600s low $700s, but for now, the stock has been juiced and expect some of this to be worked off over time here now:

As far as today, we have Alphabet earnings after the close and when we look at the (GOOGL) options breakevens let’s look at the Friday expiry at the money $157.50 straddle. The straddle is priced at $9.40 which is implying a 6% move. So straddle buyers will need a move by end of day tomorrow either above $166.90 or below $148.10 to make money. We like the technical set up above $151.75 area and a move toward $165 here makes sense. With that lets see how the calls look, there are about 50k contracts open from the $160 to $170 strikes. The puts are a bit leaner with about 30k open from $155 to $145 strikes. Seems like decent interest between $160 and $165 which makes sense here. The $162.5/$167.5 call spread is priced at $1.45 so risk/reward wise 3.4x outright or an actual 2.45x net. Many people look at it both ways, so depending upon your viewpoint. As a long time trader, I usually will go with the 3.4x metric because I can assume that I will get some value after the earnings number, it may not be the full $5.00 in this case but on the flip side I may also not be risking the full $1.45 either as the call spread depending upon the size of the move, will have some sort of value perhaps.

However if you want to look at a pure net risk/reward then looking at this trade from the 2.45x metric is correct.

So let’s just see how this goes today. We also have Intel but honestly, its so cheap back to 2011 levels, that this purely constitutes a buy and hold even if just for takeover purposes in the future, but below $18.50 would be problematic for new longs here!

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