00:00 Speaker A
heading into earnings and this is true for a lot of names right now. Heading into earnings events as an options trader, I’m observing that there’s elevated implied volatility in a lot of these options in a lot of these tech names.
00:12 Speaker A
because there’s uncertainty around the upcoming reports. So as an options trader, I like to be generally net short premium when volatility is high. So I want to leverage high premiums to my benefit.
00:23 Speaker A
So, with Google, I’m looking at Google, Google L, uh in particular. And I I I feel bullish about about Google. I think it has a chance to break out of the range that it’s been in over the past uh, I don’t know, let’s call it six to eight weeks.
00:35 Speaker A
We’ve been in a low of about 330 and a high of around 375. I think the odds favor Google breaks out to the upside.
00:42 Speaker A
And if I wanted to just go buy calls, I could, but because implied volatility is so high right now, I’d be paying through the teeth to buy those calls.
00:51 Speaker A
So what I’ve come up with is a a clever little way of having the options market pay for me to get long Google stock.
00:59 Speaker A
And the way I’m doing it is I am buying those calls. I I’m looking at buying the August 375 calls, but I want to finance that call purchase by selling August 330 puts that have a lot of premium there.
01:10 Speaker A
And so what that does, it’s a two-legged spread. You’re showing the different charts of of each individual leg. I like to think of them together as what’s called a bullish risk reversal.
01:18 Speaker A
And think of it this way, the the the chart you were just showing there is a a naked put uh chart, right?
01:25 Speaker A
So, if I just sold a naked put, then if Google goes up, great. I keep all the premium, that short put expires worthless, great.
01:31 Speaker A
If Google goes down, well then it’s like I’m long the stock. Uh if it goes down far enough, uh I could get assigned against that short put and I’ll become an owner of stock at that price and it’ll start behaving just like the P&L curve of a regular you know, long stock uh holder would look like.
01:46 Speaker A
Meanwhile, I could just buy the calls, like I said, but by selling the puts to pay for the calls, I put myself in a position that I can make money four out of five ways.
