Commentator Unveils Alphabet (GOOG) Options Strategy

Noting that Alphabet (GOOG) has a relatively low forward price-earnings ratio of 19 times while the shares’ Relative Strength Index (RSI) has fallen below 40, Schwab Senior Options Contributor Tom White recently suggested that investors sell put options on GOOG stock.

A laptop and phone open to Google’s services in an everyday setting.

White also believes that the market’s increased volatility is another factor that makes selling puts on GOOG stock a good strategy.

The Specifics of the Options Strategy

According to the commentator, $160 has become a “good base for Alphabet over the last several weeks.” Further, he wants to avoid having a strike date that will occur after April 29, the day on which GOOG is slated to report its first-quarter earnings.

Consequently, White suggests selling cash-secured puts that expire on April 17 with a $160 strike price. Using this strategy, investors can collect a credit of up to $350 per contract. And if the name ends up below $160, the commentator says that he would be “comfortable owning the shares.” Further, he noted that investors who adopt the strategy will break even at $156.50, giving them “a cushion to the downside,” compared with simply buying and owning GOOG stock.

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Disclosure: None. This article is originally published at Insider Monkey.