Generating 2.0% Monthly Income in GOOGL Using Covered Put Strategies

In late 2025, Alphabet Inc. (GOOGL) stands as a compelling case study in undervaluation and strategic financial engineering. With free cash flow (FCF) of $24.8 billion in Q4 2024 and a 4.7% annual growth in FCF for 2024 compared to 2023, the company's robust cash generation is underpinned by its dominance in digital advertising, cloud computing, and AI innovation. Analysts project 8.89 EPS for the year, while its 32.2% net margin and 32.1% ROE underscore operational efficiency. These fundamentals create a fertile ground for income-focused investors to leverage options strategies that balance risk and reward.

The Covered Put and Leveraged Call Framework

A 2.0% monthly income target in GOOGL is achievable through a combination of shorting out-of-the-money (OTM) puts and using the premium to fund in-the-money (ITM) call purchases. This approach capitalizes on GOOGL's volatility while mitigating downside risk.

Shorting OTM Puts for Premium Income
Selling OTM puts at the $90.00 strike price for December 2025, with a bid of $12.00, allows investors to collect a premium that effectively lowers their cost basis to $78.00 (before commissions) if the stock remains above $90.00 at expiration. With a 99% probability of the put expiring worthless, this generates a 13.33% return on the cash commitment-a 4.67% annualized yield. This strategy is particularly attractive given GOOGL's strong earnings trajectory and AI-driven growth, which reduce the likelihood of a significant price drop.

Leveraged ITM Calls for Amplified Upside
Simultaneously, purchasing ITM calls at the $120.00 strike price (with a bid of $14.50) offers leveraged exposure to GOOGL's potential upside. If an investor holds GOOGL shares at $95.43 and sells this call as a covered call, they commit to selling the stock at $120.00-a 26% premium. If the stock is called away, the total return (excluding dividends) would be 40.94%. However, with a 99% probability of the call expiring worthless, the investor retains the shares and the premium, achieving a 15.19% return boost.

Combining the Strategies
By pairing these two strategies, investors can create a "covered strangle," where the premium from the OTM put funds the ITM call. For example, the $12.00 premium from the $90.00 put could offset part of the $14.50 cost of the $120.00 call, reducing net outlay. If both options expire worthless, the investor retains the shares and the combined premium, yielding a 2% return in under 40 days. This dual-income approach aligns with GOOGL's strong fundamentals, as its AI and cloud investments are expected to drive long-term appreciation.

Risk-Reward Analysis and Execution

While the strategy offers attractive returns, it requires disciplined execution. The maximum risk for the OTM put is limited to the premium paid, while the ITM call provides intrinsic value and downside protection. For instance, the $120.00 call has an intrinsic value of $24.57 (assuming GOOGL trades at $144.57), ensuring a baseline return even if the stock stagnates.

However, the strategy is not without risks. A sharp decline in GOOGL's price could trigger assignment on the put, forcing the investor to buy shares at $90.00. Conversely, a rapid price surge might result in the call being exercised, capping gains at $120.00. To mitigate these risks, investors should monitor GOOGL's price and adjust strike prices or expiration dates as needed.

Conclusion

Alphabet's strong earnings growth, AI-driven innovation, and robust FCF position it as a prime candidate for income-generating options strategies. By shorting OTM puts and using the premium to fund leveraged ITM calls, investors can achieve a 2.0% monthly yield while balancing downside protection and upside potential. As GOOGL continues to invest $75 billion in AI infrastructure, its long-term value proposition remains intact, making this strategy both feasible and aligned with its growth trajectory.