The bid for world domination accelerated in Alphabet Inc (NASDAQ:GOOG; NASDAQ:GOOGL) shares today. The king of search vaulted nearly $38 overnight on better-than-expected earnings. The 4% jump brings GOOGL stock within striking distance of the coveted $1,000 mark.
Ironically, Amazon.com, Inc. (NASDAQ:AMZN) also bested earnings estimates and is nestled near the $930 zone as well. The race to quadruple digits is heating up and will no doubt be an obsession for spectators in the coming days.
On the technical front, GOOGL is firing on all cylinders. Really, what is there negative to say about a stock perched at all-time highs? The single feather in bears’ hats is its overbought status. With this morning’s flight, Alphabet shares have now risen about $100 in a little over two weeks.
So, sure, we may see some profit-taking strike from weak longs looking to ring the register. But it should be a short-term phenomenon.
Remember the myriad implications of a stock sitting at all-time highs. Every single short seller is experiencing more pain than before. The motivation for said schmucks to buy to cover their positions is sky high.
On the flipside, every single shareholder is experiencing more pleasure than ever before. No doubt their greed is whispering sweet somethings, tempting them to stay the course.
Meanwhile, the poor souls who parted with their GOOGL shares previously are looking on with huge regret — the type of regret that will drag them back into the stock, despite its lofty level.
Throw it all together, and the supply-demand status continues to favor buyers here. If you’re afraid the stock may pull back in the short-run, but don’t want to miss out if it doesn’t, try scaling in. Enter some of your position now, and some later.
Ride This GOOGL Ship to $1,000
The options market provides numerous ways to capitalize on continued strength from GOOGL. One of the lower-cost avenues is the bull call spread. The strategy consists of buying a lower strike call option while selling a higher strike call to reduce the overall cost of the position. By going out to September, we provide ourselves plenty of time for Alphabet to climb to $1,000. Buy the Sep $930/$1,000 bull call spread for $29.
The $70-wide vertical carries $29 of risk and $41 of reward. If GOOGL stock sits below $930 at expiration, you will lose the $29, and if it sits above $1,000, you will capture the $41. By risking $29 to grab $41, the strategy offers a potential 141% return on investment.
At the time of this writing, Tyler Craig had no positions on any of the aforementioned securities.
