GOOG August 29th Options Begin Trading

Tactical options analysis for Alphabet (GOOG) highlights two strategies: selling a cash-secured $175 strike put for a $5.95 premium, offering a 24.82% annualized yield if it expires worthless, and selling a covered $185 strike call for a $5.00 premium, providing a 20.71% annualized yield if it expires worthless. These strategies, presented as alternatives for investors seeking to acquire shares at a discount or enhance returns, leverage GOOG's current trading price of $176.28 and include probabilities of expiration and implied volatilities around 33-34%.

Analysis

The article presents a tactical options analysis for Alphabet Inc. (GOOG), focusing on two specific income-generating strategies. The first involves selling-to-open a cash-secured put with a $175.00 strike price, which trades at a ~1% discount to GOOG's current price of $176.28. This strategy offers an alternative entry point, establishing a cost basis of $169.05 if assigned, or a 24.82% annualized return on the cash commitment if the option expires worthless, an event with a stated 56% probability. The second strategy is a covered call for existing shareholders, involving the sale of a $185.00 strike call. This provides a potential total return of 7.78% if the stock is called away, but caps upside beyond the $185 strike. The probability of this call expiring worthless is 61%, which would result in a 20.71% annualized yield boost. A key data point is the relationship between volatility measures: the implied volatilities on the put (33%) and call (34%) are slightly elevated compared to the trailing twelve-month historical volatility of 32%, suggesting the options market is pricing in slightly more short-term price movement than recently observed, thereby enhancing the premiums available to option sellers.

Key Decisions for Investors

• For investors bullish on GOOG but seeking a lower entry point, selling the $175 cash-secured put presents a dual opportunity to either acquire shares at an effective price of $169.05 or to generate a 24.82% annualized yield if the stock remains above $175.
• Current GOOG shareholders could evaluate selling the $185 strike covered call to generate income, with a potential 20.71% annualized yield boost, but must be comfortable with capping their upside and having shares called away if the price exceeds $185.
• Investors should note that the options' implied volatilities of 33-34% are slightly higher than the 32% trailing historical volatility, which enhances the premiums for sellers but also signals that the market anticipates greater price fluctuation, a key risk factor to monitor.