Angling into GOOG puts

[c1ue]

Looking at Jan '08, 520 or 530 strikes.

If I can get a good price...

[Jim Nickerson]

Re: Angling into GOOG puts

Looking at Jan '08, 520 or 530 strikes.

If I can get a good price...

Hey, why don't you open a thread "Clue's trades" and put all your stuff there?

[raja]

Re: Angling into GOOG puts

I would be very interested in such a thread . . . but do you think he'll charge a subscription price? ;)

Seriously, one of the best things for me about iTulip is hearing other people's investment strategies and suggestions . . . .

[Guest]

Re: Angling into GOOG puts

Jim -

C1ue is one of those BOTS with the library of congress stuffed between the ears syndrome? 200 MIPS ARM-9 Microcontroller with a turbo-fan? He's a BOT, so he thinks we all want a blow by blow analysis of his option trades. What are you gonna do?

Back in the old days, these BOTS would have been called "know it alls" with the only proviso on that being that they are insufferably right, all the freaking time.

But hell, he's a BOT - he ain't human! He even admitted he's got "multiple heads"! If this gets to be a strain, go ask Rajiv what the hell he was cooking up when they designed these prototypes!

At a certain point you just wind up throwing your hands up and surrendering to the anarchic "gots to post everywhere, always, about absolutely everything" BOTS, while the rest of us scramble fruitlessly around trying to find computing errors to sling at them. It's frustrating, isn't it? :cool:

[c1ue]

Re: Angling into GOOG puts

Folks,

If you don't want me to put what I'm doing - let me know.

If I should open a separate forum, that would be ok also but I'm not a fund manager and am not trying to drum up a following and thus increase my OPM.

[Jim Nickerson]

Re: Angling into GOOG puts

Folks,

If you don't want me to put what I'm doing - let me know.

If I should open a separate forum, that would be ok also but I'm not a fund manager and am not trying to drum up a following and thus increase my OPM.

C1ue,

I think it is great if you want to put up your trades or thoughts about them. To me to open a new thread everytime you, C1ue, want to make a new statement strikes me as wasteful of space--seems reasonable to me to put it all in one thread and change the title when the trade differs.

I don't run this place, I only read here, but there are a ton of threads and it would be easiest I think to find what you are doing, assuming some are interested, if it is in a single thread. Just one man's opinion.

[Guest]

Re: Angling into GOOG puts

C1ue -

I for one greatly appreciate all your input. But I thought BOTS were supposed to be totally impervious to either compliment or disregard? After all, such notions are not "quant-ifiable", so what could they possibly mean?

[c1ue]

Re: Angling into GOOG puts

Jim,

Good feedback.

I'll consolidate in the future in a 'C1UE market moves' thread.

Where should I put it? My head isn't quite so large that this should be considered 'News' - either of them ;)

[Jim Nickerson]

Re: Angling into GOOG puts

Jim,

Good feedback.

I'll consolidate in the future in a 'C1UE market moves' thread.

Where should I put it? My head isn't quite so large that this should be considered 'News' - either of them ;)

Put them wherever you have been putting them regardless of the category. I never use categories except when starting a thread, I just look for new posts or post in last 24 hours, but I read daily.

Another point, once a person subscribes or writes to the thread, if he uses email alerts he will always be notified when you make a move, and in the meanwhile waits with breathless anticipation.

[DemonD]

Re: Angling into GOOG puts

clue, I think there are many better plays than google puts. Maybe more apple puts? Google probably will have slowed earnings growth in 3Q, but that's a pretty big gamble, and one that hasn't been a good one to make so far in Google's history. A p/e of 46 for Google for it's growth average is fairly close to market value... yes there will be earnings growth contraction as they get bigger and diminishing returns. But that may mean the price per share will stagnate or grow slowly?

I don't know I just think it's a very bad idea to make a short play on a stock that represents a company with strong fundamentals. I wouldn't buy puts on XOM or MSFT or SBUX either; but then again I wouldn't do it with AAPL which you've done successfully. These are just my thoughts.

Disclosure: I am long Google (no position in any other company I mentioned)

[c1ue]

Re: Angling into GOOG puts

DD,

In this present market with so much uncertainty - I am taking no long term positions and in fact have been knocking down most of my decade+ holdings.

I went 50% trading (I don't call it cash because it doesn't stay in interest bearing form consistently) in Q2 2006, now I'm 90% trading. I'm literally now only holding 3 positions 'long term' after last week's last financials dump: EIX, IBM, MRK

As for GOOG: I agree - there is tons of risk with this stock. I would never short it - one benefit of puts is you have a cap on your losses and it can be pretty small. Hard to argue with paying $15/share to get a piece of the action for a $550 stock.

Since I see any market meltdown resulting in a $40+ movement for GOOG, well...

Despite the Fed's last cut (or because of it), I still see a number of opportunities for the market to take it on the chin in the next 2 months.

GOOG is my way of getting into high volatility action - as was AAPL previously. I just don't like playing AAPL the other way now because there is too much hoopla over the Europe deployment of the iPhone.

The other thing I'm keeping in mind is that advertising always goes down in a recession. GOOG says that web-based is the last - but I have to say that there are still tons of real estate based popups and what not being pushed by GOOG.

The cash crunch also affects non real estate affiliated corporations - with the ability to borrow money significantly reduced, I suspect a lot of corps are going to start watching their expenses much more closely as debt resets to higher interest rates.

Lastly while GOOG makes good money and is a fairly well run company - I still don't see any advertising company maintaining their 9 digit market cap.

GOOG is closing in on the top ranks in the world by market cap - they're #24 as of now. A 20% jump from where they are now puts them in the top 15.

Is GOOG really more omnipresent right now than Samsung? Than Nokia?

Is GOOG making the same type of contribution to everyday living as Cisco? Proctor & Gamble? Chevron? Wal-Mart? Berkshire Hathaway?

The only comparable company in the $100B+ market cap club (i.e. software that is not a PC monopoly) is Oracle. They make twice the gross profit of GOOG, but have slightly over half the market cap.

So I don't think GOOG is worth its price now. But then maybe I'm smoking crack.

The company can and probably will do fine, but their market cap is ridiculous and WILL be compressed. I just don't know when ;)

[Guest]

Re: Angling into GOOG puts

C1ue -

Have you read Aaron Krowne's recent article in the Wall Street Examiner? It might be of interest with regard to committing any significant money to short plays?

http://wallstreetexaminer.com/blogs/krowne/?p=23

[Tet]

Re: Angling into GOOG puts

Looking at Jan '08, 520 or 530 strikes.

If I can get a good price...

Filled the gap, looks like GOOG is off to the races I don't think this has even begun to be overbought. Good luck.

[DemonD]

Re: Angling into GOOG puts

Clue, I can certainly respect and pretty much be on board with how you are investing. I wish I had a bit more time to get into the mechanics of option trading; but one thing I can say is betting against google is just not a good idea. I want to make my case for you, in the hopes that you can find a put play somewhere else, because GOOG is seriously just not a good candidate at this time. Here are my responses:

The other thing I'm keeping in mind is that advertising always goes down in a recession. GOOG says that web-based is the last - but I have to say that there are still tons of real estate based popups and what not being pushed by GOOG.

The opposite argument to this is that advertising is a huge industry that is still transitioning from paper to digital, and continues to grow. A serious serious economic downturn will hit all companies, but real estate revenues are still mostly going to newspapers. Advertising in the US is at least a 150 billion/year industry, that grows in lockstep with revenue growth, and yes will drop with revenue drops, but Google, IMO, is positioned to continue to benefit to a continual shift online.

Oh yeah and Google is in what like 9 million languages.

And Europeans love Google
While Latin America prefers Microsoft, Google is a close second
And finally, Asia loves Microsoft, Yahoo, and Google as well

GOOG is closing in on the top ranks in the world by market cap - they're #24 as of now. A 20% jump from where they are now puts them in the top 15.

Is GOOG really more omnipresent right now than Samsung? Than Nokia?

Right now I'm watching TV on a toshiba typing on a toshiba laptop which is connected to a set of logitech speakers and a linksys router. Meanwhile while I've typed this I've googled at least a dozen times. The "google is a verb" argument I believe is a strong one as it is really damn true.

Next question.

Is GOOG making the same type of contribution to everyday living as Cisco? Proctor & Gamble? Chevron? Wal-Mart? Berkshire Hathaway?

Well Linksys is owned by Cisco, but wasn't when I bought this router 5 years ago. I use very few direct things from P&G but I know they have a lot of stuff that is ubiquitous. I don't usually fill up at Chevron. Wal-Mart... yup I use them quite a bit. Berkshire... well, my insurance is all through AAA, although I do enjoy See's Candies once in a while, I would argue that Berkshire, as a HUGE part of the FIRE economy likely has done more harm than good to the American populace.

Google? Oh, only the best damn source for information ever that I use just about every single freaking day of my life. So yes, I would say it's contribution is right up there.

The only comparable company in the $100B+ market cap club (i.e. software that is not a PC monopoly) is Oracle. They make twice the gross profit of GOOG, but have slightly over half the market cap.

The difference is that Google is in a growth industry that is growing both by market share of total ad revenue and organically, PLUS google has been increasing market share with online advertising for years now, and their YOY growth rate of 20-30% means they deserve a high p/e ratio. This means of course if they have a miss or earnings slow down, the share price will get slaughtered, and your bet will be correct. But that bet has not been a good one, and other than the seasonal slowdown, there doesn't seem to be any reason to think earnings will be down. Their hits and clicks keep growing.

So I don't think GOOG is worth its price now. But then maybe I'm smoking crack.

The company can and probably will do fine, but their market cap is ridiculous and WILL be compressed. I just don't know when ;)

Google is fairly valued right now. Just think of the basics:

YOY earnings 28%. What multiple do you give to a company like that? 46 p/e is a reasonable valuation in that case. Now, that being said, I certainly wouldn't buy here, but I sure as heck wouldn't bet on the short side.

[c1ue]

Re: Angling into GOOG puts

This means of course if they have a miss or earnings slow down, the share price will get slaughtered, and your bet will be correct. But that bet has not been a good one, and other than the seasonal slowdown, there doesn't seem to be any reason to think earnings will be down. Their hits and clicks keep growing.

Is this the second coming of the Year 2000? Valuation based on clicks and hits? :eek:

As I noted before, Google is a fine company and is doing well. I'm not arguing that they should not exist - I'm arguing that they are ridiculously valued. My point was that even another monopolist software company - Oracle - with twice the profit has a significantly smaller multiple.

Of course there is THE monopolist: MSFT has 5x the profit and an absolute monopoly, yet only around 2x the multiple now.

Thus even if Google has a monopoly on online advertising, I just don't see how the multiple can hold up over time.

Think Cisco in 2000 when they were close to $500M market cap...fine company, simply not worth that much.

As for earnings hit or miss - Google is simply a sexy stock right now.

But I've still I've ridden the GOOG express both up and down several times already in the past year. This is why I'm calling it a volatility play.

The opposite argument to this is that advertising is a huge industry that is still transitioning from paper to digital, and continues to grow. A serious serious economic downturn will hit all companies, but real estate revenues are still mostly going to newspapers. Advertising in the US is at least a 150 billion/year industry, that grows in lockstep with revenue growth, and yes will drop with revenue drops, but Google, IMO, is positioned to continue to benefit to a continual shift online.

All you said is true, but why is an annoying popup ad a negative when Yahoo does it - but it is ok when Google fills lots of ad pages with irrelevant junk?

Seriously though - as Google is making $6B+ profit on $13B+ revenue - just how much of that $150B do you think Google will wind up with?

10%? already there
50%? Google rules the universe - TV, radio, newspapers, billboards, snail mail all trundle off into extinction?

As for international - the big advertising boy is absolutely the US market, much more so than the relative economic size of the US vs. world.

Actual advertising numbers: $300M (US), $400M (worldwide)

http://www.multichannel.com/article/CA6398559.html


To recap:

GOOG is a fine company.

Their present multiple is outrageous. GOOG could double their profit and still halve their multiple. Anything less would be a catastrophe for the stock.

Talk of international is a ridiculous short term distraction. Advertising revenues for rest of world are significantly smaller than the US market, and each language/market requires some type of additional physical person support and sales, as well as physical server proximity thus additional revenue cost.

Advertising in general is vulnerable in a recession.

http://www.leaonline.com/doi/abs/10....27736ME1401_01

Each 1% of decline impacts advertising 5%.

It also is no coincidence that the numbers of articles pushing companies to raise advertising during a recession (in order to build market share) is deafening.

And, of course, advertising is already in a recession - with the present 12% spend by financial services leading the way:

advertising spending slipped by 0.2 percent in the second quarter and is down 0.3 percent for the first half of the year.
This marked the first time since 2001 that advertising spending fell for two consecutive quarters. In 2001, ad spending fell in each quarter before rebounding a year later.

http://mediabiz.blogs.cnnmoney.com/2...ing-recession/

Methinks Google protesteth too loudly...

Google's biggest mortgage industry advertisers spent on average $3.5 million apiece on search ads in the first quarter, compared with $1.9 million in the year earlier period.

http://today.reuters.com/news/articl...1-ArticlePage3

Good news: Mortgage industry ad buyers are spending more each.
Bad news: there are fewer of them - MUCH fewer.

If GOOG was getting $8M/year per advertiser and loses 50 or 100 or them, this is not insignificant.

I hope you are successful in seeing Google hit whatever valuation you think they will achieve.

I just don't think the same way!