Markets

Profit From Alphabet Inc’s (GOOGL) Earnings Miss

An image of a stock chart on a display
Credit: Shutterstock photo

InvestorPlaceInvestorPlace - Stock Market News, Stock Advice & Trading Tips

I recently shared a story on how to get free profits from Alphabet Inc (NASDAQ: GOOG , NASDAQ: GOOGL ) stock. My profits came too fast, but luckily, now that the earnings are out, I have another chance to reset .

My interpretation of the GOOGL earnings is that the machine is still on rails. It's a money-making machine with multiple assets that have over a billion users. Management is still somewhat in check when it comes to extraneous spending on wild ventures. So I am left worrying only on Wall Street's perception when trading Alphabet stock.

I am bullish in the long term, so I will sell someone a losing lotto ticket. The trick is to find a level where GOOGL is not likely to go and let time do the rest.

Click to Enlarge The Trade: Sell the GOOGL Jan 2018 $650 put. This is a bullish trade for which I collect $16 per contract to open. This trade has a 90%-plus theoretical chance of success and a 23% price buffer from current levels.

By selling naked puts, I commit to buying the stock at my sold strike if GOOGL stock falls below it. So I only do this if I am willing and able to own the stock there. My breakeven level is $634 per share.

Usually I like to hedge my trade by taking an opposing trade to balance. But in this uber bullish environment, I will leave it un-hedged. Short of a market crash I should have enough time to manage price gyrations.

Selling naked puts is not suited for all portfolios or trader profiles. Risk tolerances vary, so I will offer an alternate trade with similar metrics. This will have finite risk, so a better fit would have more conservative approaches without changing the trade spirit.

The Alternate: Sell the GOOGL Jan 2018 $650/$640 credit put spread. This is also a bullish trade for which I collect $2.50 per contract to open. This also comes with a 90% theoretical chance of success. The yield on money risked would be 33%. All I need is GOOGL to stay above my sold spread to win.

I am not required to hold these options trades through expiration. I can close any of them for partial gains or losses.

Nicolas Chahine is the managing director of SellSpreads.com . As of this writing, he did not hold a position in any of the aforementioned securities. You can follow him on Twitter at @racernic and stocktwits at @racernic .

More From InvestorPlace

The post Profit From Alphabet Inc's (GOOGL) Earnings Miss appeared first on InvestorPlace .

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.

In This Story

GOOG GOOGL AMD

Other Topics

Stocks

Latest Markets Videos

    InvestorPlace

    InvestorPlace is one of America’s largest, longest-standing independent financial research firms. Started over 40 years ago by a business visionary named Tom Phillips, we publish detailed research and recommendations for self-directed investors, financial advisors and money managers.

    Learn More