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Search for Profits in Google Stock With a Bull Call Spread (GOOGL)

The search for new highs in Google (GOOGL) stock is starting to bear fruit. The internet titan has benefited from relative strength in the technology sector and scored a nice breakout during Tuesday’s rally.

Let’s take a closer look into Google’s ongoing recovery to see if there’s a trade to be found.

Unlike the major market indices, GOOGL has succeeded in reclaiming the high ground. With yesterday’s surge, Google now sits atop both the 50-day and 20-day moving averages, signaling that its uptrend is back on track.

Google stock’s all-time highs north of $700 beckons, and with little by way of resistance standing in its way, the Google stock price has a clear shot at returning to its former heights.

A second development of note is the virtual absence of any distribution days in recent weeks. These high-volume down days have negative implications, so not seeing any of them following the August crash has bolstered the resolve of Google stock bulls.

GOOGL stock

Source: OptionsAnalytix

On the option front, prices remain elevated. The recent market crash juiced option premiums, and they have yet to return to their pre-crisis levels.

The IV Rank for Google stock options sits at 56%, placing implied volatility in the upper half of its one year range. Couple the high implied volatility with Google’s lofty price tag and you’re dealing with some seriously expensive options.

To cut the volatility exposure and cost of the trade, a spread trade is a must here.

GOOGL Stock Trade

If you’re looking for an aggressive way to capitalize on Google stock’s return to the $700 mark, consider buying the Nov $670/$700 call spread. The vertical spread consists of buying to open the Nov $670 call while selling to open the Nov $700 call for a net debit of $13.50.

The max loss is limited to the initial $13.50 net debit and will be lost if Google stock price sits below $670 at expiration.

The max gain is limited to the distance between strikes minus the net debit, or $16.50, and will be captured if GOOGL can climb above $700.

At the time of this writing Tyler Craig had no positions on any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2015/09/google-stock-wants-higher-googl/.

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