Google Inc (NASDAQ:GOOG) will release its fourth quarter earnings report tonight after closing bell, and investors seem to be expecting a great report. Shares rose as much as 2% in premarket trading as investors prepared for the results. The last time around, investors pushed Google stock up over $1,000 a share, setting a new record for the search giant’s shares, but what if the results aren’t as great as Wall Street expects? To mitigate the risk, Tyler Craig of Tyler’s Trading suggests (via InvestorPlace) that investors take an iron condor approach.

Google

Suggesting Google options

Craig gauges expectations for Google Inc (NASDAQ:GOOG)’s post-earnings gap using January weekly options which will expire tomorrow. He said the Jan 1,120 straddle trades at $65.25, which essentially prices in a 6% move in Google shares by the end of the week. He suggests short volatility plays heading into today’s earnings report as an option for investors expecting “a somewhat muted reaction in Google stock” after today’s earnings report.

He said investors could explore the increased option premiums by “entering a February iron condor” and selling the Feb 1,245 – $1,250 bear call spread and the Feb 1,000 – 995 bull put spread, seeing a total net credit of about $1. He said the reward is capped at the first $1 credit and will be captured if Google Inc (NASDAQ:GOOG) stays between 1245 and 1000 by the time the February monthly options expire on the 21st.

He notes that the maximum risk in this options trade is “limited to the spread between srikes minus the net credit, or $4.” However, he suggests that investors can reduce their risks by exiting the bear call spread if Google Inc (NASDAQ:GOOG) stock goes over the short call strike at 1245 or the bull put spread if shares drop under the short put strike at $1,000.

What Wall Street expects for Google

Expectations for Google Inc (NASDAQ:GOOG) have been running quite high heading into today’s earnings report. Jefferies analysts actually raised their price target for the company’s shares, expecting upward movement after today’s report.