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DRJ: Options saved my Google trade

Jon "DRJ" Najarian (ask-drj@optionmonster.com)

Traders took profits early today in Google, and it was the right move.

This is a great stock, and it had been running like a champ ahead of today's earnings release. I was riding that rally with call spreads, an option strategy that lets you really leverage a pop.

But this morning, the options paper showed traders jumping off the bandwagon. Our data systems at optionMONSTER detected heavy selling in the October 800 calls early in the session, which means that traders didn't see much chance of the stock ending the week above that level.

That activity prompted me to exit my longs, and it wound up being a good move before the company's quarterly results were published prematurely and GOOG tanked!

The puts then caught fire, and premiums shot up as investors scrambled for protection. The
October 700s, which started the day more than $50 of out the money were quickly in play and at one point traded for more than $60.

Overall it's been a pretty crazy day for GOOG, which is now halted down 9.03 percent at $687.30. Even before they stopped the trading, more than 160,000 option contracts had changed hands in the name. That's triple the daily average, and makes it the fifth busiest stock on our systems today.

(Want to learn more about how Jon and Pete Najarian trade options? Click here to find out how.)

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