Alphabet (GOOGL) continues to stand out as one of the most compelling large-cap technology stocks, even after a strong rally in 2025. While many investors focus solely on price appreciation, there are smarter, income-focused ways to benefit from Alphabet’s upside without taking excessive risk. One such approach involves using options to generate short-term yield while simultaneously positioning for long-term gains. With GOOGL stock options strategies, investors can potentially earn a 1.77% one-month yield and still maintain exposure to what many analysts believe is an undervalued stock.
Why Alphabet Still Looks Undervalued
Alphabet closed recently near $309, slightly below its late-November highs. Despite this pullback, the company’s fundamentals remain exceptionally strong. The key driver is free cash flow (FCF), which has continued to expand as Alphabet scales its advertising, cloud, and AI businesses.
In its latest quarter, Alphabet posted an FCF margin close to 24%, well above its longer-term average. Even using conservative assumptions, Alphabet could reasonably generate $90–$100 billion in annual free cash flow over the next year. Applying a market-appropriate FCF multiple suggests a valuation meaningfully higher than today’s market capitalization, implying upside of roughly 25%–30% over the next 12 months.
This disconnect between fundamentals and price is what makes Alphabet an ideal candidate for income-plus-upside option strategies.
Using Out-of-the-Money Puts to Generate Monthly Income
One of the most conservative options strategies available is selling out-of-the-money (OTM) put options. This approach allows investors to earn premium income upfront while agreeing to buy shares at a lower price if the stock falls.
For example, a near-term put option with a strike price modestly below Alphabet’s current trading level can generate a yield of roughly 1.77% in just one month. This means that an investor setting aside the required capital to secure the position can earn immediate income as long as GOOGL remains above the strike price at expiration.
If the stock stays above that level, the option expires worthless, and the investor keeps the full premium. If the stock dips, the investor is assigned shares at a price below the current market — effectively buying Alphabet at a discount.
Why This Strategy Fits Alphabet’s Risk Profile
Alphabet’s balance sheet strength, recurring revenue streams, and dominant market position reduce the risk of severe downside over short time frames. That makes selling OTM puts particularly attractive, as the probability of a sharp collapse below key support levels remains relatively low compared to more speculative stocks.
Additionally, this strategy aligns well with long-term investors who would be comfortable owning Alphabet shares anyway. Instead of waiting passively for a pullback, they get paid to wait.
Reinvesting Put Income to Buy In-the-Money Calls
The strategy becomes even more compelling when investors reinvest the income from short puts into in-the-money (ITM) call options. ITM calls provide leveraged exposure to upside while offering built-in downside protection through intrinsic value.
By selecting a longer-dated ITM call with a strike price below the current market price, investors reduce time decay risk and gain exposure similar to owning shares, but with far less capital.
Over several months, repeated short-put premiums can offset a large portion of the call’s cost. This significantly lowers the effective entry price and improves the overall risk-reward profile.
How the Combined Strategy Works in Practice
Here’s how the approach fits together conceptually:
- Monthly OTM put sales generate steady income
- That income is accumulated over several months
- The proceeds are used to partially or fully fund ITM call purchases
- The ITM calls provide leveraged upside if GOOGL rises
- If the stock moves sideways, downside risk remains limited
Even in a flat market, the income from put premiums can help offset option costs. If Alphabet rallies meaningfully, the ITM calls can deliver outsized percentage gains relative to the capital invested.
Scenario Analysis: Upside and Downside
If Alphabet advances toward its longer-term valuation targets — potentially in the $380–$410 range — ITM calls could see substantial gains, even if the stock rises gradually. Conversely, if the stock remains range-bound, the income generated from repeated put selling helps neutralize losses.
In a worst-case scenario where Alphabet declines modestly, investors may end up owning shares at a discounted price — a result many long-term investors would welcome.
Why This Is a Lower-Stress Way to Play GOOGL
Unlike speculative short-term trading, this GOOGL stock options strategy emphasizes patience, income generation, and disciplined risk management. It does not rely on precise market timing or aggressive leverage. Instead, it monetizes Alphabet’s stability and long-term growth prospects.
This approach is especially appealing in markets where valuations matter and volatility creates opportunities for option sellers.
Alphabet’s combination of strong free cash flow, dominant market position, and attractive valuation creates a rare opportunity for investors seeking both income and growth. By selling out-of-the-money puts, investors can earn a 1.77% one-month yield, while reinvesting that income into in-the-money calls offers leveraged exposure to Alphabet’s long-term upside. For disciplined investors who believe GOOGL remains undervalued, this strategy provides a balanced, flexible way to generate returns in multiple market scenarios.