Google (GOOG: sentiment, chart, options) was victorious today in a trademark lawsuit dispute with Geico. The discount insurance company had disparaged GOOG for selling ad space to rival insurance companies on result screens where "Geico" has been entered into the search field. While a judge ruled in favor of GOOG, investors haven't been favoring the shares of late. For the past several weeks, GOOG has been shuffling sideways around the 170-180 region. Yesterday, in A Picture of Options-Related Resistance, Bernie Schaeffer hypothesized about a trend in the GOOG options pits that may be holding the stock back.
Despite the stock's brief respite, GOOG has earned a rating of 7.0 on the Equity Scorecard feature of Schaeffer's Gold. One of the indicators responsible for this relatively high reading is the equity's SOIR, which stands at 0.96. This indicator has been on the downswing for quite some time, however, falling over the past six weeks since notching a reading of 1.40 in late October. Massive trading in GOOG options pits today could result in a tangible change in the stock's SOIR rating. The December 180 call has seen over 23,000 contracts trade on standing open interest of only 16,000 contracts. In other words, some of today's calls are likely to translate as new open interest, even though the positions are only valid until expiration this Friday. The December 175 call and put are also notably active, as is the far-out-of-the-money January 280 call, with nearly 12,000 contracts trading on open interest of just over 200 contracts.
I must admit to struggling to understand this analysis. It is old anyhow but I think it gives a flavour of how some of the us traders are thinking. I think what he is saying is that if there are a wall of calls at strike near currrent price and close to expiration this acts as resistance as the owners sell to cash in profit. Interesting the current open interest configuration shows gap at 200. Anyone else who fully understands what is going on?
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