Products
Platforms
Accounts
Inspiration
About
Support
For institutions
Log in Open account
UAE
CFDs and forex (FX) are complex instruments and come with a high risk of losing money rapidly due to leverage. 65% of retail investor accounts lose money when trading CFDs with this provider.
Show more
CFDs and forex (FX) are complex instruments and come with a high risk of losing money rapidly due to leverage. 65% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs, FX, or any of our other products work and whether you can afford to take the high risk of losing your money.
Show less
Investing with options: Alphabet earnings

Investing with options: Alphabet earnings

Options 10 minutes to read
Koen Hoorelbeke

Investment and Options Strategist

Summary:  This article will explore various options strategies in anticipation of Alphabet Inc.'s upcoming earnings report. We'll outline approaches for both bullish and bearish investors while comparing the risk and rewards to traditional stock buying.

Investing with options - Alphabet earnings

Alphabet Inc. is slated to release its Q3 2023 earnings report on October 24th. With a strong track record, including a revenue beat of $74.6 billion and EPS of $1.44 in its last quarter, market participants are keenly awaiting the outcome. Regardless of what the report reveals, options offer investors a myriad of ways to capitalize on the event.

Options strategies vs. conventional stock purchase

To understand the value propositions of using options, it's crucial to weigh them against simply buying the stock. With Alphabet's last traded price at $135.60, investing directly in shares is straightforward but offers less leverage and flexibility than options. 
 
Important note: the strategies and examples provided in this article are purely for educational purposes. They are intended to assist in shaping your thought process and should not be replicated or implemented without careful consideration. Every investor or trader must conduct their own due diligence and take into account their unique financial situation, risk tolerance, and investment objectives before making any decisions. Remember, investing in the stock market carries risk, and it's crucial to make informed decisions.
 

1. Bullish outlook - buy call option:

Strategy: Buying a long-term call option

  • Instrument: BuyToOpen 1 20-Sep-2024 Call 115 @ $32.75, delta of 0.79
  • Premium: $32.75 (debit, per share)
  • Premium and risk:
    • Premium cost: $32.75 x 100 (per contract) = $3,275
    • Max risk: $3,275 (if Alphabet is below 115 at expiry)
    • Max reward: Significant (gains rise as Alphabet's stock price rises)
  • Breakeven point: $115 (strike) + $32.75 (premium) = $147.75
  • Why: A call option allows you to benefit from any upside in the stock with a fraction of the capital required to buy shares outright.
 

2. Bullish outlook - buy stock using ITM put option

Strategy: Selling an in-the-money put option

  • Instrument: SellToOpen 1 27-Oct-2023 Put 140 @ $6.20, delta of -0.72
  • Premium: $6.20 (per share)
  • Premium and risk:
    • Premium cost: $0 (you receive the premium)
    • Max risk: $13,380 (if Alphabet falls to zero, adjusted by premium received)
    • Max reward: $620 (if Alphabet is above 140 at expiry)
  • Breakeven point: $140 (strike) - $6.20 (premium) = $133.80
  • Why: This allows you to acquire shares at a discounted rate or pocket the premium if the stock stays above the strike price.
 
3. Bearish outlook - buy put option:

Strategy: Buying a long-term put option

  • Instrument: BuyToOpen 1 20-Sep-2024 Put 155 @ $24.35, delta of -0.63
  • Premium: $24.35 (debit, per share)
  • Premium and risk:
    • Premium cost: $24.35 x 100 (per contract) = $2,435
    • Max risk: $2,435 (if Alphabet is above 155 at expiry)
    • Max reward: Significant (gains rise as Alphabet's stock price falls)
  • Breakeven point: $155 (strike) - $24.35 (premium) = $130.65
  • Why: A put option offers the potential for profit if the stock declines, akin to short-selling but with limited risk.

4. Bearish/bullish outlook - covered call

Strategy: writing a covered call

  • Instrument: SellToOpen 1 03-Nov-2023 Call 144 @ $1.41, delta of 0.20
  • Premium: $1.41 (credit, per share)
  • Premium and risk:
    • Premium cost: $0 (you receive the premium)
    • Max risk: Limited (potential loss of stock appreciation above 144)
    • Max reward: $141 (if Alphabet stays below 144 at expiry)
  • Breakeven point: Not applicable (already own the stock)
  • Why: This strategy provides extra income while holding the stock.
  • Yield:
    • For the next 11 days, the yield is approximately 1.04% [(1.41/135.60)*100].
    • Annualized, this comes out to about 34.64%.
 

Time decay consideration (theta decay)

The strategies recommended utilize options with a one-year expiry to mitigate the impact of time decay, or the rate at which an option loses value over time. Time decay accelerates as options near their expiration, making longer-dated options less susceptible to this erosion in value.
 

Risks and rewards

Options strategies come with their own sets of risks, from potential losses to the complexities of managing multiple positions. But they also offer a robust toolset for hedging and leveraging positions. Therefore, understanding your risk tolerance and employing appropriate strategies is essential.
 
Conclusion
 
Options offer a versatile array of strategies for capitalizing on Alphabet's upcoming earnings report. Whether bullish or bearish, there's an options play for every outlook. As always, it's crucial to weigh the risk and rewards before making a move.
 

Related articles:

Options are complex, high-risk products and require knowledge, investment experience and, in many applications, high risk acceptance. We recommend that before you invest in options, you inform yourself well about the operation and risks. In Saxo Bank's Terms of Use you will find more information on this in the Important Information Options, Futures, Margin and Deficit Procedure. You can also consult the Essential Information Document of the option you want to invest in on Saxo Bank's website.

Quarterly Outlook

01 /

  • Upending the global order at blinding speed

    Quarterly Outlook

    Upending the global order at blinding speed

    John J. Hardy

    Global Head of Macro Strategy

    We are witnessing a once-in-a-lifetime shredding of the global order. As the new order takes shape, ...
    Read full article
  • Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever

    Quarterly Outlook

    Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever

    Jacob Falkencrone

    Global Head of Investment Strategy

    Read full article
  • Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    Quarterly Outlook

    Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    John J. Hardy

    Global Head of Macro Strategy

    Read full article
  • Equity Outlook: The ride just got rougher

    Quarterly Outlook

    Equity Outlook: The ride just got rougher

    Charu Chanana

    Chief Investment Strategist

    Read full article
  • China Outlook: The choice between retaliation or de-escalation

    Quarterly Outlook

    China Outlook: The choice between retaliation or de-escalation

    Charu Chanana

    Chief Investment Strategist

    Read full article
  • Commodity Outlook: A bumpy road ahead calls for diversification

    Quarterly Outlook

    Commodity Outlook: A bumpy road ahead calls for diversification

    Ole Hansen

    Head of Commodity Strategy

    Read full article
  • FX outlook: Tariffs drive USD strength, until...?

    Quarterly Outlook

    FX outlook: Tariffs drive USD strength, until...?

    John J. Hardy

    Global Head of Macro Strategy

    Read full article
  • Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Quarterly Outlook

    Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Althea Spinozzi

    Head of Fixed Income Strategy

    Read full article
  • Equity Outlook: Will lower rates lift all boats in equities?

    Quarterly Outlook

    Equity Outlook: Will lower rates lift all boats in equities?

    Peter Garnry

    Chief Investment Strategist

    After a period of historically high equity index concentration driven by the 'Magnificent Seven' sto...
    Read full article
  • Commodity Outlook: Gold and silver continue to shine bright

    Quarterly Outlook

    Commodity Outlook: Gold and silver continue to shine bright

    Ole Hansen

    Head of Commodity Strategy

    Read full article

Content disclaimer

None of the information provided on this website constitutes an offer, solicitation, or endorsement to buy or sell any financial instrument, nor is it financial, investment, or trading advice. Saxo Bank A/S and its entities within the Saxo Bank Group provide execution-only services, with all trades and investments based on self-directed decisions. Analysis, research, and educational content is for informational purposes only and should not be considered advice nor a recommendation.

Saxo’s content may reflect the personal views of the author, which are subject to change without notice. Mentions of specific financial products are for illustrative purposes only and may serve to clarify financial literacy topics. Content classified as investment research is marketing material and does not meet legal requirements for independent research.

Before making any investment decisions, you should assess your own financial situation, needs, and objectives, and consider seeking independent professional advice. Saxo does not guarantee the accuracy or completeness of any information provided and assumes no liability for any errors, omissions, losses, or damages resulting from the use of this information.

Please refer to our full disclaimer and notification on non-independent investment research for more details.
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-mena/legal/disclaimer/saxo-disclaimer)


Business Hills Park – Building 4,
4th Floor, office 401, Dubai Hills Estate, P.O. Box 33641, Dubai, UAE

Contact Saxo

Select region

UAE
UAE
Products & pricing
Platforms
Accounts & service
General
Other
Legal

All trading and investing comes with risk, including but not limited to the potential to lose your entire invested amount.

Information on our international website (as selected from the globe drop-down) can be accessed worldwide and relates to Saxo Bank A/S as the parent company of the Saxo Bank Group. Any mention of the Saxo Bank Group refers to the overall organisation, including subsidiaries and branches under Saxo Bank A/S. Client agreements are made with the relevant Saxo entity based on your country of residence and are governed by the applicable laws of that entity's jurisdiction.

Apple and the Apple logo are trademarks of Apple Inc., registered in the US and other countries. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.