August 1st Options Now Available For Alphabet (GOOGL)

The article discusses potential options strategies for Alphabet Inc (GOOGL) stock, highlighting a $160 put contract with a $2.57 bid, offering a potential 1.61% return (11.73% annualized) if it expires worthless, and a $180 call contract with a $6.30 bid, providing a possible 5.71% return if the stock is called away. Analytical data suggests a 78% chance of the put expiring worthless and a 53% chance for the call, with implied volatilities of 40% and 32% respectively, compared to the stock's trailing twelve-month volatility of 32%.

Analysis

The article outlines two specific options strategies for Alphabet Inc. (GOOGL), currently trading at $176.24 per share. Firstly, selling a put contract at the $160.00 strike price with a bid of $2.57 offers an investor the potential to acquire GOOGL shares at an effective cost basis of $157.43, representing an approximate 9% discount to the current share price. There is a 78% probability, based on current analytical data, that this out-of-the-money put will expire worthless, in which case the seller would realize a 1.61% return on the cash commitment, or an 11.73% annualized YieldBoost. Secondly, for investors holding GOOGL shares, selling a covered call at the $180.00 strike price with a bid of $6.30 could generate a total return of 5.71% if the stock is called away by the August 1st expiration. This strike is approximately 2% above the current market price. Analytical data suggests a 53% chance this call option expires worthless, allowing the investor to retain both shares and the premium, resulting in a 3.57% YieldBoost, or 26.10% annualized. The implied volatility for the put option is 40%, while the call option's implied volatility is 32%, aligning with GOOGL's actual trailing twelve-month volatility of 32%. This suggests put options at the $160 strike are pricing in higher expected volatility compared to the calls or historical stock movement.

Key Decisions for Investors

• Investors interested in acquiring GOOGL shares at a discount to the current market price of $176.24 could consider selling the $160 strike put, aiming for a cost basis of $157.43 or a 1.61% premium if the option expires worthless.
• Existing GOOGL shareholders seeking to generate income could evaluate selling the $180 strike covered call, which offers a potential 5.71% return if called away or a 3.57% premium (26.10% annualized) if it expires worthless, though this caps upside potential beyond $180.
• Note the elevated implied volatility of 40% for the $160 put compared to the 32% for the $180 call and the 32% historical volatility, indicating a potentially higher premium for downside protection or speculation on a price drop to that level.