Based on Alphabet's Strong Results This Week, an Option Trade Can Be Made to Bet the Bottom is in

Alphabet, the parent company of Google and YouTube, delivered stronger-than-expected first-quarter results, outperforming forecasts on both revenue and earnings. This performance stands out amid what has been a painful but necessary period of reevaluation for the Big Tech sector. After months of turbulence, it appears the worst is behind us. I believe now is the time to position for Google's upside potential.

‍

Despite the recent rally, Alphabet’s stock remains approximately 20% below its all-time highs, largely due to ongoing concerns around trade tariffs. With that in mind, I am looking to express a bullish outlook on Google’s stock, aiming for a move back toward the $200 mark. However, rather than simply buying shares outright, I prefer using an options spread to better define my risk and manage exposure.

‍

One highlight from Alphabet’s first-quarter earnings report came from an unexpected area — unrealized gains. The company reported $11.2 billion in "Other Income," a staggering 293% increase compared to the same period last year. Of that figure, $8 billion was attributed to unrealized gains from “non-marketable equity securities.”

‍

According to TradeAlgo, a large portion of this gain was linked to Alphabet’s investment in SpaceX, which was valued around $350 billion in a private share transaction completed in December 2024. This hidden strength added an extra layer of confidence to the bullish case for Alphabet.

‍

Turning to the broader market backdrop, April’s price action has been nothing short of historic. The Cboe Volatility Index (VIX) briefly surged above 60 as investors scrambled to reposition amid the escalating uncertainty over trade tariffs.

‍

Alphabet’s stock experienced its own roller-coaster ride during this period. After reaching a record high of $207.05 in early February, shares plunged by 32% following the announcement of new tariffs, bottoming out at $140.53 in April. Such sharp moves are eye-opening, especially for a company valued at roughly $2 trillion.

‍

Given the heightened volatility and the elevated level of the VIX — which remains above 25 — option premiums are still relatively expensive. This creates an opportunity: I want to maintain a bullish stance but also aim to offset some of the cost of establishing the position by structuring a spread.

‍

Here’s the specific trade setup I am considering:

• Sell the June 20, 2025, $150 GOOGL put for a premium of $2.85.
• Buy the June 20, 2025, $170 GOOGL call for a premium of $6.25.
• Sell the June 20, 2025, $190 GOOGL call for a premium of $1.25.

‍

The net cost to enter this spread would be $2.15, or $215 per one-lot spread. This trade was established when Alphabet’s shares were trading around $165.

‍

It's important to recognize the implications of this strategy. By selling the $150 put, the investor takes on the obligation to buy Alphabet shares at $150 if the stock falls below that level and the put is assigned. This means that while the upside is capped, the downside risk could become significant if Alphabet’s stock drops sharply and the investor ends up holding the shares at a loss.

‍

On the upside, the maximum profit potential is $17.85 per share, or $1,785 per one-lot spread. This is calculated by taking the $20 width of the call spread (between the $170 and $190 strikes) and subtracting the $2.15 cost to put on the trade.

‍

In essence, this strategy allows me to stay bullish on Alphabet while controlling my upfront risk and trying to finance part of the spread cost through the sale of the put option. It also positions me to capture significant upside if the stock continues to recover and moves toward the $190 mark over the coming months.

‍

Overall, Alphabet’s strong earnings report, hidden gains from strategic investments like SpaceX, and the broader market's volatile backdrop combine to create a compelling opportunity.

‍

With a thoughtful options strategy, it’s possible to participate in Google’s potential rebound while managing the risks that remain in this uncertain market environment.

‍