GOOG is currently trading up about 9% (50 pts) premarket. They beat big and have retraced nearly all of the downmove from the bad earnings reaction 3 quarters ago.
Now GOOG is known for volatile moves, but what surprised me was the extent that the options market got it wrong.
At the time of the close, the ATM straddle for GOOG was being priced around $23. That means the options market was expecting a volatile event that would make it move up or down 23 points. We got nearly double that move.
Could this blowout have been forseen? I'm not so sure. The giant move will seem so obvious in hindsight but being screamingly bullish into GOOG earnings has failed miserably for the past 3 events. I guess its time had come.
So what happens now? Well, when we've seen big gaps up in other tech names into earnings (AMZN, PCLN, AAPL) there generally is some good follow through. GOOG is a special case where it reports earnings during options expiration, and big gaps up don't have follow through until the Monday after. So right now, I think it can do two things: it will either pin around 590, or all the option shorts will be forced to cover their short calls, lending more fuel to the fire-- if this happens, the implied volatility will stay elevated and we won't see a big vol crush characteristic of GOOG.
Edit: Of course, as soon as I post this, GOOG runs another 10 pts.