Found in the Flow - Let Me Google That For You

TradingView chart of GOOG's price with Google's logo overlaid.

Alphabet, Inc. has two tickers, but why, one might wonder?  GOOG and GOOGL are seemingly the same; these stocks trade at nearly the same valuations, each with nearly a 1.85T (1,850,000,000,000) market capitalization.

So why do both of these tickers exist, and what do they represent?

A Review of Types of Stock

Publicly traded companies are divided in a variety of ways.  The ways in which they are divided up depends on the “special functions” given to the different classifications of these divisions.  All publicly traded companies issue common stock, as those are the fundamental underlying assets of equity on which their valuations are composed; as such, common stock is also referred to as shares or equity.

The reason these divisions are called “shares” is because by owning a share you own a share of the company; you are a shareholder and as such experience in the ebb and flow of the share’s underlying price changes.  This is the very essence of trading, after all, to hold as many shares in a company that ebbs in the upward direction.  While this might sound incredibly elementary, there are many other descriptors for types of equity, and it might become muddled if not studied.

N.B.! Stocks are the things that your options contracts are derivatives of and are betting upon.  For every options contract you hold, you are the proud owner (or seller!) of the right of 100 shares per contract.  Most brokers also allow you to own shares along with your options contracts.

Preferred Stock

Some companies divide themselves up in other ways, such as but not limited to issuing preferred stock.  Preferred stocks are special in that they provide additional benefits for its holders; preferred stocks might be thought of as being backed by a bond (or a combination thereof), and they are particularly useful as they are not as volatile as common stocks and always pay out a fixed dividend.

Examples of preferred stocks may be viewed in Bank of America’s listings, such as but not limited to BAC-B, BAC-E, and BAC-K; each of these are preferred series (GG, E, and HH, respectively) with their own market capitalizations, prices, and coupon rates, and all rates are higher than 4.06% as of this writing.

Often, preferred stock is callable.  Callable preferred stock provides the company issuing the stock the option to call the stock from the shareholder.  Calling stock typically takes place after five years, in which the issuer has the right to buy back your shares at face value.  This leaves owners of callable preferred stock vulnerable to the whims of the stock issuer, who may wish to call the stock just when the shareholder would want to instead own it themselves.

Class A, B, and C Stock

As stated, companies might divide themselves up further.  From the division of common and preferred stock, common stocks can be divided in multiple classes of shares, such as but not limited to class A, B, and C.  These classes make distinctions between voting rights, dividends, and even to the company’s assets and capital.

Traditionally, class A shares are reserved for insiders so that they can focus on executive functions and not worry about issues of agency, where those with voting power can choose to drive a company in a direction not shared by the majority of stakeholders.  Fiduciary responsibility is required for members of the board of directors--and all stakeholders in a company, for that matter--and issues of agency can arise if a company is controlled by those with a conflict of interest.  

Class A shares typically have more voting rights than other classes, with one notable exception being Facebook, who issues class As en masse and reserves its class Bs for its insiders, who have ten times the voting power than class A holders.

In spite of the previously linked article, Facebook ultimately decided on issuing class C shares, which would have afforded its holders no voting rights.  There is no legal definition of classes of stock, so while Facebook chose to situate themselves differently, this is entirely up the company and its board of directors to decide.

On the aforementioned class C shares:  these class of shares do not afford its holders any voting rights, only the benefit of holding the shares and therefore the underlying changes in price.

There are other classifications, such as class F, “founders” or “competition” stock, which give ten-times the voting power of Class A (so for every F stock you own, you have as much voting power over the company as one A stock).

Alphabet, Inc.’s Stocks GOOG & GOOGL

In 2013, a ruling determined that Alphabet, Inc. could split its stock and issue class C shares of its existing stock.

As clarified above, these class C shares offer no voting rights for its holders, and exist so that holders can benefit from the volatility of Alphabet, Inc’s price changes, but nothing more.  

As stated in the referenced article:

The judge approved the settlement despite noting that, while it is designed to ensure that co-founders Larry Page and Sergey Brin retain control of Mountain View, Calif.-based Google, the two are not being forced to give any concessions to other shareholders. Instead, like other shareholders, Page and Brin will receive Class C shares in an amount equal to their current Class B stock holdings — more than 24 million shares each.

This resulted in the owners of Google receiving class C shares equal to their class B holdings, resulting in them retaining the same amount of ownership over Google, in spite of the stock split.

Seen above is GOOG’s price in green and GOOGL’s price in blue since October 11th, 2021 until October 15th, 2021.

On October 11th, 2021 Alphabet Inc.’s class A ticker, GOOG, opened at 2,796 and its class C ticker, GOOGL, opened at 2,785.84.  As previously mentioned, both of Alphabet Inc.’s stocks trade at nearly the same valuations, each with nearly a 1.85T (1,850,000,000,000) market capitalization.  

On October 15th, 2021, GOOG closed at 2,833.50 and GOOGL closed at 2,827.36 respectively.  SPY, or the SPDR S&P 500 ETF Trust, opened on October 11th at 437.16 and closed October 15th at 445.87.

That week, GOOG had a 1.0134% increase, GOOGL increased by 1.0149%, and SPY increased by 1.0199%; this is an extraordinarily myopic measure, but as can be seen--albeit as limited as this is--that GOOG and GOOGL operate in relative tandem, as well as follow the tumultuousness of the market.

A Review of Unusual Options Activity in Alphabet Inc.

Even outside of the stock movements of Alphabet Inc.’s tickers, the options activity of GOOG and GOOGL operate in relative synchronization, as well.

What is noteworthy, however, is that GOOGL had approximately 41.9% of the “unusual options activity” as GOOG over a five month period (May 27th, 2021 to September 15th, 2021).

“Unusual options activity” in this test was simply a measurement of volume over open interest, new contracts not previously being traded, now being traded, in larger lot sizes than previously seen (250 or greater).

Recently and more specifically, on Friday, October 15th, 2021, there was noteworthy options activity on both GOOG and GOOGL; however, of this noteworthy activity, betting sizes were in fact different, which was anticipated from the aforementioned backtest where GOOGL had lesser betting than GOOG.

Seen above are the unusual options activity in GOOG from the Unusual Whales Flow.
Seen above are the unusual options activity in GOOGL from the Unusual Whales Flow.

Of significance, the betting sizes in the GOOGL unusual options activity were a fourth of the sizes of GOOG’s.  The largest sized bet on October 15th, 2021, in GOOGL were the 56 contracts traded on the $2725 strike put option dated for November 12th, 2021; however, the largest sized order on GOOG were the 200 contracts for the $2590 put option contract for the October 29th, 2021 expiration.

A reminder:  you may click the ↕ emoji in order to view all of the other positions that were assumed to be a part of a multi-leg strategy.  While the aggregate data might not always be 100% accurate, this is a worthwhile trick to investigate options strategies more seriously.

Alphabet Inc.’s Outlook & Flow Data

It must be noted that there is no statistical edge found--yet--within the options flow data covered below.  There are more questions than answers as of this writing, and any and all assistance in uncovering if there is some kind of alpha to uncover with options betting within GOOG as compared to GOOGL or vice versa would be most welcomed.  Feel free to get a hold of us at the Unusual Whales Discord.

The charts above represent GOOG’s historical price in blue, call volume in green, put volume in red, and open interest in yellow.
The charts above represent GOOGL’s historical price in blue, call volume in green, put volume in red, and open interest in yellow.

Of note, GOOG’s put volume increased to 23,371 along with its call volume to 30,126, as compared to GOOGL whose put volume decreased to 25,674 and its call volume decreased to 66,198.

What can be visualized is that on October 13th, 2021, GOOGL and GOOG's call and put volumes were at new local lows, but GOOGL had recovered perhaps more quickly, or had reached its new high sooner, and now has already begun to begin to lower, as compared to GOOG, which has not yet.

However, of note, both GOOG and GOOGL’s open interest have continued to increase, so while volumes are changing between the two, open contracts have remained open regardless of daily volume changes.

Seen above are the aggregate data in GOOG of the positions taken with minimum premiums of $30,000 or more.

Of these, 59.6% are of bullish premium, 72.7% ask-side, and 56.7% being in calls.

Seen above are the aggregate data in GOOGL of the positions taken with minimum premiums of $30,000 or more.

Of these, 53.5% are of bullish premium, 52.2% ask-side, and 85.2% being in calls.

What is noteworthy or significant is that the majority of $30,000 or more whale betting is significantly more represented by calls than puts in GOOGL as compared to GOOG, 85.2% compared to 56.7%, respectively.

Above are GOOG’s options chain premiums broken down by expiration.

Of note, $129,912,362 premium has been traded on the November 19th, 2021 options chains; the majority of bearish premium has been traded on the same expiration, amounting to $114,051,211 of betting.

Above are GOOGL’s options chain premiums broken down by expiration.

By contract to GOOG, GOOGL’s greates bullish premium has been traded on the October 22nd, 2021 options chains, with $185,908,702 premium traded; however, premium on October 29th, 2021 is the leader for bearish betting at $98,586,088 premium traded.

What is noteworthy is that GOOG has seen $243,963,573 of its majority of premium traded, as compared to GOOGL which has seen $284,494,790 which also had closer expirations being betted upon than GOOG.  It is not yet conclusive as to why bet sizing would be different and on different trading dates, but this would be research for a later article now that this has been uncovered.

Become a Whale by Trading Like an Unusual One

As always, if you enjoyed this look into some common questions being asked, or a deeper dive into perhaps some more difficult ones, please join us at the Unusual Whales Discord community:  discord.gg/unusualwhales  We would love to meet you and help you with any and all of your questions.

The Discord is free and there are thousands upon thousands of traders just like you who are eager and willing to help and ask for help.

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