Here's my earnings prediction for GOOG

Andy Swan created and co-founded DaytradeTeam five years ago on a principle of empowering individual stock and options traders with the techniques and analysis methods typically reserved for elite professionals. His expertise in technical analysis and commitment to educating members earned DaytradeTeam a top-ranking among advisory services for several years.

I'm ready to make my earnings prediction on Google....and after having quite a successful track record with this stock, I can feel the pressure building to be right again!

(GOOG | Quote | Chart | News | PowerRating) reports earnings after the bell today, and I think that they will redeem themselves with a good number that gives the stock a nice initial pop tomorrow.... into the 430-440 range. My reasoning is simple -- Yahoo's (YHOO | Quote | Chart | News | PowerRating) earnings report showed strength in search advertising revenues, and an expectation for those revenues to continue getting stronger. Since Google is currently a pure-play on search advertising, it makes sense to think that these elements would carry over nicely to Google earnings as well.

So am I loading up on GOOG stock here?

Unfortunately, no. The problem is that GOOG has already had a nice run up from the $345 level where I was so confident as a buyer during my CNBC appearance to defend GOOG against a very bearish Barron's article.

In other words, much of the revenue growth and expectations for search ad growth are already priced into the stock after a 20% upside move. That's why my bullish target on GOOG for Friday is only a gain of 20-25 points, less than a 10% move for this high-priced stock. If I'm wrong and their earnings disappoint again, the results could be very very ugly, meaning that the risk/reward ratio at $410 simply isn't near as appealing as it was 75 points ago when I was so convinced GOOG was headed higher.

So, how will I play this earnings report?

The best way to play this report is going to be through the use of an option spread that limits risk. Most likely, I will be BUYING JUN 400 calls (nicely in the money with a fairly low time-premium attached to them), and SELLING APR 430 calls for around $5/contract of pure time premium. This will give me a nice net-bullish position that is short on immediate time premium (APR options expire tomorrow).

This position will most likely will profit on Friday no matter what GOOG does (as long as it doesn't absolutely TANK), but with limited risk in the event that GOOG severely disappoints--a great way to play a "mildly bullish" approach to earnings that are close to the end of a current options cycle.

Happy Trading,
Andy Swan