How to Get Paid to Buy GOOGL at a Steep Discount
At about $306.36 a share, Alphabet (GOOGL) is trading about 11% below its 52W high.
Do you think GOOGL stock is a good long-term bet at current levels? What about at a 30% discount at about $215 per share? If you think that is a steal, and have some cash ready to go, here is a trade.
8.6% annualized yield at 30% margin of safety, by selling Put Options.
- Sell a long-dated Put option expiring 3/19/2027, with a strike price of $215
- Collect roughly $1,012 in premium per contract (each contract represents 100 shares)
- That’s about 4.6% annualized yield on the $21,500 you’re setting aside for the possibility of buying the stock
- This cash parked in a savings or money market account will earn an extra 4.0%, taking total yield to 8.6%
- And you give yourself a chance to buy GOOGL stock at deep discounted price of $215
However, this is not the only stock strategy in town. Trefis High Quality Portfolio is a sophisticated framework designed to reduce stock-specific risk while giving upside exposure.
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Possible Trade Outcomes: You Win Either Way
| Stock Price Outcome | What It Means For You |
|---|---|
| GOOGL stays above $215 | You keep the full $1,012 premium – 4.7% extra income over the next 375 days on cash that might otherwise earn you 4.0% or less. You never buy the stock and simply walk away with the cash. |
| GOOGL closes below $215 | You’ll be obligated to buy 100 shares at $215. But thanks to $1,012 premium, your effective cost basis is just $204.88 per share – a roughly 33% discount from current level. |
But to hold this trade with conviction, you want to see long term upside in the stock. Because if it comes to it, you want to be excited about buying the stock cheap.
First, you want fundamentals to check out. For details, see Buy or Sell GOOGL Stock or check Alphabet Investment Highlights
Second, you want to better understand competitive advantage and industry tailwinds.
Why Hold GOOGL Stock Long-Term
Alphabet’s collection of dominant, deeply integrated assets forms a wide moat built on a powerful network effect. The company is at the epicenter of two major secular tailwinds: the ongoing migration of enterprise IT to the cloud and the transformative potential of artificial intelligence. Its immense cash generation and strong balance sheet allow for aggressive investment to maintain its technological leadership. Even with significant regulatory headwinds, the underlying businesses are indispensable to the digital economy, making us comfortable owning the stock for the long term if assigned.
Competitive Advantage
We classify GOOGL’s economic moat as WIDE, with the primary source being Network Effect
- Successfully implemented price increases across Google Workspace, YouTube Premium, and Google Cloud services, with the market largely absorbing the new pricing due to the integration of high-demand AI features like Gemini.
- Google’s ecosystem (Android, Chrome, Search, Maps, Workspace) creates significant switching costs for users who are deeply integrated into its network of products and services.
- Maintains overwhelming market share in core areas: Search (~90%), Chrome browser (~66-72%), and Android OS (~71-72% globally), demonstrating persistent user preference and a powerful network effect.
- The brand ‘Google’ is a verb in the dictionary, synonymous with searching the internet, which indicates unparalleled mindshare, although there is a noted trend of younger audiences using the term ‘searching’ and other platforms for discovery.
Industry Tailwind
The industry tailwind is STRONG, with CAGR projection of 15.4% (Grand View Research), 12.0% (MarketsandMarkets)
Secular Trend: Digital Transformation & AI Adoption
Key Risks: Significant and ongoing antitrust litigation from the U.S. Department of Justice and other global regulators, which could force divestitures or changes to its business model. Potential for technological disruption from AI-native search competitors like ChatGPT and a shift in user behavior.
Financial Guardrails
Cash Generation: Positive Free Cash Flow
Balance Sheet: Alphabet maintains a fortress balance sheet with a substantial net cash position, enabling massive investments in AI infrastructure ($175B-$185B projected for 2026) and a recent $20 billion bond sale, indicating no risk of bankruptcy.
If you are not comfortable with options or stock-specific trades, Portfolios are the way to go as they can protect and grow wealth even better.
Smart Investing Begins With Portfolios
Stocks soar and sink – the key is staying invested. A balanced portfolio helps you ride market volatility, boosts gains and reduces single stock risk.
Why settle for average market returns? The Trefis High Quality (HQ) Portfolio invests in a diverse group of 30 stocks that have collectively delivered stronger upside with reduced volatility compared to the broader indices. Discover the methodology behind these smoother, higher returns by checking the HQ Portfolio performance data.