Boosting Google Stock Yield: A Long-term Option Strategy
Julian WestTuesday, Nov 5, 2024 2:52 pm ET
1min readAlphabet Inc.'s (GOOGL) strong earnings growth and positive market sentiment present an opportunity to boost the yield on Google stock using a long-term option strategy. By selling a covered call, investors can generate significant income while limiting their upside potential. This article explores how to implement a long-term covered call strategy on Google stock and its potential benefits.
Alphabet reported a 15% year-over-year increase in revenues for the third quarter of 2024, surpassing analysts' expectations. The company's stock price has been basing since July but is currently trading above its rising 21-, 50-, and 200-day moving averages. According to IBD Stock Checkup, GOOGL stock ranks No. 4 in its group and has a Composite Rating of 96, an EPS Rating of 97, and a Relative Strength Rating of 70. This bullish outlook aligns with the current market sentiment, as indicated by the option chain, which shows a leaning towards calls.
To boost the yield on Google stock, consider selling a long-term covered call. A Sept. 19, 2025, call option with a strike price of 180 traded for around $16.25 this morning. This option provides an annualized income of over 10%, significantly higher than GOOGL's 0.23% dividend. Additionally, there's potential appreciation of $1,000 if the stock rises enough to get called away by expiration, yielding a total return of $2,625 plus a little extra from the dividend.
Selling a long-term covered call offers several benefits. First, it generates extra income through the option premium, increasing the overall yield from the investment. Second, it provides some downside protection, as the premium received offsets some of the purchase cost in case the stock goes to zero. Lastly, it allows investors to create their own yield, rather than relying on the company's dividend.
However, it's essential to consider the risks involved in selling covered calls. If the stock price declines, the option premium received reduces the risk of loss. But if the stock price rises significantly, investors may miss out on potential capital gains. To mitigate risks, consider selling out-of-the-money (OTM) options with longer expiration dates, balancing the trade-off between higher premiums and limited upside potential.
In conclusion, a long-term covered call strategy can significantly boost the yield on Google stock while providing some downside protection. By selling a Sept. 19, 2025, call option with a strike price of 180, investors can generate an annualized income of over 10% and potential appreciation of $1,000. However, it's crucial to weigh the pros and cons and consider your risk tolerance before initiating this strategy. Always conduct thorough due diligence and consult your financial advisor before making any investment decisions.
Alphabet reported a 15% year-over-year increase in revenues for the third quarter of 2024, surpassing analysts' expectations. The company's stock price has been basing since July but is currently trading above its rising 21-, 50-, and 200-day moving averages. According to IBD Stock Checkup, GOOGL stock ranks No. 4 in its group and has a Composite Rating of 96, an EPS Rating of 97, and a Relative Strength Rating of 70. This bullish outlook aligns with the current market sentiment, as indicated by the option chain, which shows a leaning towards calls.
To boost the yield on Google stock, consider selling a long-term covered call. A Sept. 19, 2025, call option with a strike price of 180 traded for around $16.25 this morning. This option provides an annualized income of over 10%, significantly higher than GOOGL's 0.23% dividend. Additionally, there's potential appreciation of $1,000 if the stock rises enough to get called away by expiration, yielding a total return of $2,625 plus a little extra from the dividend.
Selling a long-term covered call offers several benefits. First, it generates extra income through the option premium, increasing the overall yield from the investment. Second, it provides some downside protection, as the premium received offsets some of the purchase cost in case the stock goes to zero. Lastly, it allows investors to create their own yield, rather than relying on the company's dividend.
However, it's essential to consider the risks involved in selling covered calls. If the stock price declines, the option premium received reduces the risk of loss. But if the stock price rises significantly, investors may miss out on potential capital gains. To mitigate risks, consider selling out-of-the-money (OTM) options with longer expiration dates, balancing the trade-off between higher premiums and limited upside potential.
In conclusion, a long-term covered call strategy can significantly boost the yield on Google stock while providing some downside protection. By selling a Sept. 19, 2025, call option with a strike price of 180, investors can generate an annualized income of over 10% and potential appreciation of $1,000. However, it's crucial to weigh the pros and cons and consider your risk tolerance before initiating this strategy. Always conduct thorough due diligence and consult your financial advisor before making any investment decisions.
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