Morons? (Cramer)

Adam Warner blogs about Cramer saying that call sellers on GOOG were morons (link)
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You should recognize that pretty much every outsized gain, ones where the stocks go up on small, niggling positives is about short-selling. The Google (GOOG) 480, 490, 500, 510 strikes? Tons of call-sellers, taking advantage of premiums too juicy to resist. Morons: limited upside, unlimited downside.

Breaking news: Naked call selling has unlimited upside risk. Never sell anything.

There is some validity to the notion that call shorts on expiration get trapped and are forced to chase a stock higher into the next call short. And so on.

But to call them morons is utterly.......moronic. GOOG did not just report earnings out of the blue. The date was known, the volatility was pumped, and selling options ahead of an earnings report is net-net not a bad strategy. There is an expected gain element to it, something beyond his black and white nonsense.
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My take: if someone bets the ranch by selling options, puts or calls, before earnings or even after, the insult might be appropriate. However, keep in mind that the volatility is in the price of the options before the report. Sometimes the option buyers win, but certainly not always. It is easy to see in hindsight what the correct play was. Ahead of the report, not so easy. If the call sellers are morons, then the call buyers must be the opposite, since they are taking the other side of the bet. We'll see if the option buyers or sellers win with tonight's AAPL report, and who the moron's will be tomorrow.

The logical conclusion that one might come to is that buying calls before a big earnings announcement is a smart move? Hardly, the road to riches over the long term, though as in the case of GOOG, there are occasional home runs. A 35 point move was in the price, and the stock got an 80 point move. How often does it happen that way? If it happens often enough the price of the options keeps going up, until again selling the options becomes the better play. Options have a way of balancing things out that way. Those that continue to make big bets and wrong bets go down with the ship, and leave the game.

Stock market is frustrating me at the moment. Gold is even more frustrating for the gold bulls, what with oil continuing to make new highs and gold lagging worse and worse.