Alphabet reported strong third-quarter earnings with revenues increasing 15% year over year to $88.27 billion. It surpassed analysts' expectations. Google stock price has been basing since July but is currently trading above rising 21-, 50- and 200-day moving averages.
According to IBD Stock Checkup, GOOGL stock ranks No. 4 in its group and has a Composite Rating of 96, an EPS Rating of 97 and a Relative Strength Rating of 70.
Investors who think Google stock might trade sideways for a few months after this earnings pop can use a covered call strategy on their underlying stock position to increase their income. Here's how.
Google Stock: The Cash-Secured Put
A covered call involves buying 100 shares of the underlying stock and simultaneously selling a call option against those shares.
Selling the calls limits the upside but increases the yield from the investment in the form of option premium. The investor keeps the premium generated from selling calls no matter what happens with the stock.
GOOGL stock only pays a 0.23% dividend, but savvy investors can significantly increase the yield from their Alphabet shares using covered calls.
When trading covered calls, most investors sell monthly calls against their stock to make the most of the effects of time decay.
That makes a lot of sense but also requires a lot of active management.
What if we sold longer-term covered calls against Alphabet stock? Let's take a look.
Long-term Covered Calls
On Alphabet stock, a Sept. 19, 2025, call option with a strike price of 180 traded for around $16.25 this morning. Since each contract has 100 shares, that's $1,625 in premium per contract.
Purchasing 100 shares of Alphabet stock cost around $17,000 this morning. The premium received offsets some of that cost and in effect reduces your risk in the unlikely event the stock goes to zero.
You can also view it as creating your own yield. Instead of the paltry 0.23% yield, the covered call premium provides income of over 10% annualized. Plus, with a strike price of 180, there is also $1,000 of appreciation potential if the shares rise enough to get called away by expiration. That produces a $2,625 return plus a little extra from the dividend of Alphabet.
Covered calls are a fantastic way to generate extra income from a stock holding while also providing some downside protection.
Investors would need to weigh the pros and cons of the stock before initiating a bullish trade like a covered call.
As for yesterday's cash-secured put in Palantir, the gap up on its earnings report is basically making the put nearly worthless. That means you can close the position for nearly maximum profit. There isn't much reason to risk the $180 in hand trying to hold out for the remaining $2 in profit.
Remember that options are risky and investors can lose 100% of their investment.
This article is for education purposes only and not a trade recommendation. Remember to always do your own due diligence and consult your financial advisor before making any investment decisions.
Gavin McMaster has a Masters in Applied Finance and Investment. He specializes in income trading using options, is very conservative in his style and believes patience in waiting for the best setups is the key to successful trading. Follow him on X/Twitter at @OptiontradinIQ.
