$Alphabet Inc.(GOOG)$ stock has been treading water for the past month. GOOG closed at $167.93 per share on Monday, about flat with the price on July 26 of $168.68, a month ago. It is only slightly lower since releasing its Q2 results on July 23 (closing the next day at $174.37).
So it’s reasonable to take advantage of this lull, especially if you are already a shareholder in GOOG stock. The idea is to sell covered call in nearby expiry periods.
DoJ Mulling Move to Break up Google Hurt Stock Performance
The U.S. Department of Justice is reportedly mulling plans to rein in Google's dominance in online search including a break up after a recent court ruling determined that the company monpolized the online search market.
The potential breakup plan comes after the DoJ recently scored a major legal victory against Google. Federal Judge Amit P. Mehta ruled on Aug. 5 that Google illegally maintained a monopoly in the online search and text advertising markets.
Cutting Google off from Chrome would likely cause more damage. Chrome accounts for nearly two-thirds of the web browser market, according to StatCounter, and the company collects data on its users (unless they opt out) to craft targeted ads.
That uncertainty has cast a dark cloud over Alphabet's future. Investors should also remember that Alphabet faces other ongoing regulatory challenges in Europe in addition to its antitrust trials in the U.S. It takes big risks to bet Alphabet's ability to weather the antitrust headwinds. In essence, you can make extra income to reduce the opportunity costs to hold GOOG shares.
Sell Covered Calls to Reduce Opportunity Costs
For example, look at the Sept 27 expiration period, a month from now. It shows that the $180 strike price call option trades for $1.11 on the ask side. That provides an annual return of 7.13% to the short seller of these calls.
The break-even point is $181.11 ($180+$1.11). Traders will face losses if the stock rises above $181.11. If the stock price fell below $180 on Sept 27, investors can obtain option premium income from selling calls, which can reduce the holding cost and losses compared to buying the underlying stock alone.
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