Setting the scene

The 50-day moving average (50-DMA) sits near USD 235, providing potential short-term support. This level also aligns with significant options activity, reinforcing it as an area of market interest. Combining technical and options-based evidence can help identify levels where price movement may slow or stabilise.

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.

The example trade: short 235 put expiring 31 October 2025

• Current share price: USD 251.65
• Option premium received: USD 3.15 (or USD 315 per contract)
• Cash reserved: USD 23,500 (enough to buy 100 shares at USD 235)
• Breakeven price: USD 231.85 (strike price – premium)
• Return if not assigned: 1.34% for about one week
• Illustrative annualised yield: ~54% (for comparison only; real results vary)

If Alphabet’s share price stays above USD 235, the option expires worthless and the investor keeps the premium. If it falls below that level, the investor is likely assigned and purchases 100 shares at an effective cost of USD 231.85—around 8% below today’s price.

Why focus on the 235 strike?

1. Probability balance: The option’s delta of -0.22 implies roughly a 22% chance that the stock price will finish below the strike at expiry. In simple terms, this means there’s about a one-in-five chance you’ll have to buy the shares. It does not mean you’ll make money—rather, it measures the likelihood that the option finishes at a level where the seller must follow through on the agreement to buy shares.
2. High open interest: The 235 strike has the most contracts outstanding (in this expiry) meaning it’s a key level for market participants. Such concentrations often act like “speed-bumps,” slowing price movements.
3. Technical relevance: The 50-DMA sits near 235, supporting the idea that this level may attract buyers.

What could happen after earnings?

Scenario 1: Alphabet stays above USD 235
The option expires worthless, and the investor keeps the USD 315 premium. The cash becomes available again for future trades.

Scenario 2: Alphabet dips modestly
If the price ends between USD 231.85 and USD 235, assignment is possible. The investor buys 100 shares at an effective price of USD 231.85—a discounted entry point.

Scenario 3: Alphabet drops sharply
The investor is assigned above market value. Choices include:

• Holding the shares long-term.
• Selling a covered call to generate additional income while waiting for recovery.
• Rolling the put forward or to a lower strike to reduce exposure over time.

Understanding the risks

A cash-secured put carries downside risk similar to owning the stock. If Alphabet’s share price falls far below the strike, losses can continue beyond the breakeven point. Earnings-related price gaps can exceed expectations, and while assignment is manageable, it requires sufficient capital and patience. Early assignment is uncommon but possible if the option’s time value disappears. Transaction costs, liquidity, and timing may all affect realised returns.

Variations and hedging ideas

• Lower strike (e.g., 230): Offers a greater margin of safety but collects a smaller premium.
• Wait until after earnings: Selling options once volatility settles can reduce gap risk.
• For shareholders: Pairing a protective put with a covered call forms a collar, capping both downside and upside during turbulent periods.

Key takeaway

This example shows how investors willing to own Alphabet near USD 232 can potentially earn income while waiting for the right entry price. Beyond a single trade, the principle fits neatly within a diversified portfolio that uses defined‑risk strategies to manage timing and exposure.

It demonstrates how disciplined use of options can complement long‑term stock ownership—generating incremental returns without relying on short‑term speculation. Monitoring volatility and reassessing after each earnings cycle helps maintain perspective and adjust for new opportunities. The strategy aligns with a long‑term mindset: disciplined, defined, and patient.