Covered Calls: Alphabet (GOOGL)
Truthfully, I see Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL) as a growth stock but not necessarily as a momentum stock. I think of those as rising in a totally irrational manner with no real fundamentals behind it. GOOGL stock has excellent fundamentals, and on a net-cash basis, is trading at a fairly reasonable multiple.
Still, it is getting pricey in a pricey market. GOOGL stock trades at 29x net income, if you back out the net cash position. On a 19% annualized growth rate estimate, that’s not at all unreasonable.
GOOGL stock presently trades at $967 and has $150 per share in cash, meaning its net-cash price is $817. I’d love to find a very high priced set of covered calls for GOOGL stock.
If you sold the 15 Dec $960 covered calls, you would get a whopping $61 per contract, or $6,100 in cash. That’s 6.3% for a five month holding period and a nice downside hedge.