No doubt, the eggheads who espouse the efficient-market theory would say Google shares were priced “just about right” when regular-session trading ended on Tuesday afternoon. Do we then regard GOOG’s so-far 65-point drop in after-hours trading as just a fluke – the kind of thing one might expect to happen, say, once in a decade? Actually, once a month would be more like it. Be that as it may, Wall Street’s talented shakedown artistes were letting Google fall hard as dusk settled on New York. Fools and optimists having stepped aside, GOOG shares were registering the encephalographic spasms of panic-stricken sellers, some of whom, we would bet, begged their own mothers to buy the stock with both fists within the past week.

(Click on image to see how efficient markets work)

What has changed to make the stock a pariah? Merely this: Q4 earnings did not live up to expectations. And it wasn’t a case of missing the whisper number by a penny or two, either: First Call had been expecting $1.76 per share, but the actual number was $1.54. It may be scant consolation to those who went home long the stock, but there doesn’t appear to have been any significant insider selling in advance of the news. GOOG experienced moderate weakness in the first 30 minutes of the session but rallied 16 points thereafter, giving back only a third of the gain during the remainder of the day.

Google insiders, it would appear, can keep a secret. But as I’ve already conceded, this would be scant consolation to anyone unfortunate enough to have held GOOG shares yesterday when the music stopped. I wasn’t one of them, but don't infer that I came away from the debacle unscathed. In fact, I had neglected to cancel an ostensibly stingy bid for some QQQ Feb 42 calls. Difficult as these calls had been to acquire for 0.65 intraday, one could have bought a thousand of them for 0.55 when the after-hours downdraft hit in GOOG, a key component of the underlying index. Now, as far as we’re concerned, the best thing that could happen would be for the Feb 42 calls to go down in flames over the next few days; for that would mean that the Feb 40-Feb 39 puts spread we hold 64 times -- effectively for nothing -- would increase in value by about $500, theoretically, for every $50 lost on the calls.