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Alphabet Inc (GOOGL) Stock Targeting a Triple-Digit Return

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It has been a good, but volatile, ride for Alphabet Inc (NASDAQ: GOOG , NASDAQ: GOOGL ) shareholders in 2017. Now supports are once again firming up both off and on the price chart for GOOGL stock. And for shorter-term investors, a bullishly targeted butterfly is one way to position and capture a nice profit range with limited risk in lieu of owning shares of Alphabet.

How to Trade Alphabet Inc (GOOGL) Stock While It Corrects

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When it comes to large-cap tech outfits like Alphabet, political risks ranging from China to net neutrality to immigration laws remain a question mark. But waiting on a resolution is like waiting on Godot.

It may take a while. As well, those eventual outcomes could always prove beneficial to GOOGL.

Of course, there are also the potential political supports, such as cash repatriation and favorable corporate tax cuts, to consider. Not only is passage of such legislation more popular and likely easier to push through Congress, it would certainly be a boon for Alphabet.

What's more, GOOGL stock is looking great again after its recent earnings report. Bottom line, earnings missed but growth is back. With its Q4 results, Alphabet proved its business focuses outside the company's bread-and-butter advertising search revenues, are starting to pay-off for the company.

For one, mobile search and YouTube both showed strong results and helped with Alphabet's overall "exceptional" year-over-year sales growth of 24%.

But newer investments are also coming into their own. The company's aggressive shift into hardware such as its Pixel smartphone, AI-enhanced Home and virtual reality helped Alphabet grow its "other revenues" by more than 62% on sales of $3.4 billion.

GOOGL Stock Daily Chart

Away from Alphabet's overall bullish narrative off the price chart, GOOGL stock is showing technical support for a long stake by investors.

Following a fairly stiff post-earnings bout of profit-taking from brief all-time-highs, Alphabet has managed to find support from a Fibonacci zone, key price pivot dating back to last February's high, as well as the intermediate-term, 50-day simple moving average.

Looking forward, targeting the post-earnings high of $867 appears logical. At roughly 4% from current prices, but with no overt company-specific catalysts on the immediate horizon to push GOOGL shares aggressively higher, I like the idea of using a targeted long butterfly spread.

GOOGL Stock Bullish Call Butterfly Spread

Timing is everything. This is especially true with options strategies as calls and puts are wasting assets. Our last discussion on Alphabet options is intimately aware of this, as a lower-risk, bullishly placed long butterfly literally expired one day and $1 dollar short of cleaning up.

I suppose you could say the last trade got trumped.

Nevertheless, in looking at Alphabet's options and given what has been addressed, the GOOGL March $845/$860/$875 is attractive.

With GOOGL trading at $833, the out-of-the-money and bullishly placed butterfly is priced for $2.20 per spread, or less than one-third of one percent of the GOOGL stock price. A maximum profit of $12.80 or return approaching 600% would occur if GOOGL rallied by 3.25% over the next month and landed on the sold center strike $860 call at expiration.

The desired and very precise outcome for maximizing returns is not a high-probability event by any stretch. However, with its limited risk, profit range from roughly $847 to $873 and maybe the use of a 50% stop loss in the event profit-taking turns into something more ominous, a GOOGL stock butterfly looks well positioned for the situation.

Investment accounts under Christopher Tyler's management do not currently own positions in any of the securities or their derivatives mentioned in this article. The information offered is based upon Christopher Tyler's observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT .

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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