Google Antitrust Case Escalates: Is It Time to Bottom-Fish with Options?

The U.S. Department of Justice (DOJ) has escalated its antitrust case against Google. Recently, the DOJ submitted a request to the court, proposing that Google divest its Chrome browser and Android operating system while imposing restrictions on the company’s ability to train AI models.

DOJ’s Proposal

According to a report by the Financial Times on November 21, the DOJ believes that separating Chrome and Android from Google’s control could weaken the company’s dominance in the online search market. If the proposal is accepted:

• Google will no longer own a browser and will be barred from re-entering the browser market for five years.

• Google must divest investments related to search engines, query-based AI products, and advertising technologies within six months.

• Competitors must be allowed to access Google’s search index, user data, and advertising data at marginal cost while ensuring privacy protection.

This could end Google’s exclusive control over vital data resources critical for AI training.

Chrome Divestiture

Bloomberg earlier reported that the DOJ plans to force Google to sell Chrome. This move is expected to allow competitors to reclaim their market share, breaking Google’s longstanding monopoly over search engines.

Restrictions on AI Training

The DOJ also demands that Google limit the content used for training its AI models. Prosecutors argue that Google’s market practices reflect an unfair advantage derived from illegally acquired dominance.

Monetary Agreements with Apple

One of the DOJ’s concerns is Google’s annual multi-billion dollar payments to Apple to maintain its search engine as the default option in Safari. In 2021, these payments exceeded $20 billion, a key factor in Google’s search engine dominance.

Google's Response

Google strongly opposes these proposals, calling them "shocking and overly aggressive." The company argues:

• Divesting Chrome and Android would harm consumers, as both are free and serve as loss-leaders to promote Google’s broader ecosystem.

• The demands could significantly impact Google’s AI investments, undermining its global technological leadership.

The case is ongoing, with Judge Amit Mehta expected to decide by mid-2025. Meanwhile, political dynamics, including the potential return of Donald Trump as U.S. President, may influence the DOJ's antitrust agenda.

Selling Put Options: A Strategy for Google Bulls

Amidst this antitrust turbulence, selling put options can be an appealing strategy for investors optimistic about Google’s long-term performance.

Example: Selling a $172.5 Strike Put Option (Expiring December 20)

1. Bullish Outlook:
   Selling a put option signals confidence that Google’s stock price will remain above the $172.5 strike price at expiration.

2. Premium Income:
   Investors immediately collect a premium of $665 per contract (covering 100 shares, equivalent to $66,500).

3. Maximum Gain:
   The premium of $665 is the maximum profit, realized if the stock price exceeds the strike price at expiration.

4. Maximum Risk:
   If the stock drops significantly (e.g., to $150), the investor may incur substantial losses. Maximum Risk=(Strike Price−Market Price)×100−Premium Received\text{Maximum Risk} = (\text{Strike Price} - \text{Market Price}) \times 100 - \text{Premium Received}Maximum Risk=(Strike Price−Market Price)×100−Premium Received

5. Break-Even Point: Break-Even=Strike Price−Premium per Share=172.5−6.65=165.85\text{Break-Even} = \text{Strike Price} - \text{Premium per Share} = 172.5 - 6.65 = 165.85Break-Even=Strike Price−Premium per Share=172.5−6.65=165.85

Considerations

• Appropriate for: Investors confident in Google’s short-term stability or long-term growth.

• Not Suitable for: Volatile markets or scenarios with significant negative catalysts (e.g., antitrust rulings).

• Risks: Significant potential losses in the event of a sharp stock price decline.