GOOG August 8th Options Begin Trading

The article details two options-based strategies for Alphabet (GOOG) shares, currently trading at $172.56, offering potential income or discounted acquisition. Selling the $170 put, which is out-of-the-money, offers a 23.22% annualized premium if it expires worthless (58% probability) or an effective acquisition cost of $165.35. Alternatively, a covered call using the out-of-the-money $175 strike provides a 24.60% annualized premium if it expires worthless (52% probability), or a 4.31% total return if the stock is called away by August 8th. Both strategies emphasize a "YieldBoost" concept, with implied volatilities (33-34%) closely tracking GOOG's 32% historical volatility.

Analysis

The options market for Alphabet (GOOG) presents specific income-generating and stock acquisition strategies based on its current trading price of $172.56. For investors interested in acquiring GOOG, selling the out-of-the-money put option at a $170.00 strike price provides a $4.65 premium, effectively lowering the acquisition cost basis to $165.35 if assigned. There is a 58% probability, based on current analytics, that this put will expire worthless, in which case the seller realizes a 2.74% return on the cash commitment, equivalent to a 23.22% annualized yield. For current shareholders, a covered call strategy using the $175.00 strike offers a $5.00 premium. This strategy would generate a 4.31% total return if GOOG's price rises above $175.00 by the August 8th expiration. Alternatively, if the call expires worthless (a 52% probability), the premium represents a 2.90% return boost, or a 24.60% annualized yield. Critically, the implied volatility for these options (33-34%) is closely aligned with GOOG's actual trailing twelve-month volatility of 32%, suggesting that option premiums are not significantly elevated relative to the stock's recent price behavior.

Key Decisions for Investors

• Investors bullish on GOOG but seeking a more attractive entry point could sell the $170 put to either acquire shares at an effective cost of $165.35 or generate a 23.22% annualized yield on the cash secured for the position.
• Current GOOG shareholders could sell the $175 covered call to generate an immediate premium yielding an annualized 24.60%, but must accept that their upside is capped at a 4.31% total return if the stock is called away by the August 8th expiration.
• The close alignment between implied volatility (33-34%) and historical volatility (32%) indicates that option premiums are fairly priced relative to recent risk, suggesting these strategies are not based on unusually high or low market expectations for future price swings.