GOOG Bearish Calendar Put Spread Appears to be a Bargain at 82 Cents


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This GOOG Calendar Put Spread Could Pay 3.1 to 1

Bearish play with a target stock price of $170

Strategy has +308% upside potential and 18% undervalued


Strategy: Long GOOG Calendar Put Spread
Sell 28-Jun-24 170 Put1.15
Buy 12-Jul-24 170 Put1.97
Debit:$0.82


Alphabet - Class C Capital Stock has fallen by -0.5% today to $175.73. The price action today indicates stock and market weakness. Setting up this calendar spread with strikes at $170 gives you a bearish bias to tap into GOOG stock's weakness.

Option Profit Calculator Results for GOOG Calendar Spread at 28-Jun-24 Expiration

In this scenario, the optimal stock price for the option strategy would be $170.00 on the date of the first expiration, June 28, 2024. This is equal to the strike price of the options in the spread. Since there is notable downward pressure in both the market and GOOG, and the strikes are below the current stock price of $175.73, the spread is taking advantage of the market's bearish bias. If the stock price is $170.00 at expiration, we can benefit from the 28-Jun-24 put, which we sold, expiring worthless, and the option that we are long, the 12-Jul-24 put, will still have time premium built in.

Since we do now know what the exact implied volatility will be on June 28, we can use our historical data to make an educated estimate to help us calculate the value of the 12-Jul-24 option. Applying the median historical implied volatility of 27.4 from similar options, the theoretical value of the put is 3.35 at the date of the 28-Jun-24 expiration. Using the above assumptions gives us a potential upside of +308% for this calendar spread.

GOOG Calendar Spread Value vs. Market Price

According to Market Chameleon estimated value, GOOG Calendar Spread is trading at a 18% discount to historical benchmark.

If we use historical data to measure how similar spreads in GOOG were priced in the market, the 4-year average price was 0.99, with a high mark of 1.55 and a low of 0.65.

Currently, the calendar put spread is bid at 0.66 and offered at 0.82. The midpoint of the spread is 0.74.

If we use 0.99 as our historical fair value benchmark, the current market ask price is at a 18% discount, while the current market midpoint represents a 26% discount.

Current PriceHistorical Values of Similar Spreads
BidAskMidpointAverageHighLow
0.660.820.740.991.550.65
Market Chameleon captures daily records of market data to calculate historical benchmarks and generate estimated values.

Takeaway

The GOOG calendar put spread we've identified here can be a good way to play a bearish outlook because the option strategy has a +308% upside potential, is 18% underpriced relative to historical measures, and will benefit from the stock price moving lower to $170.

See how Market Chameleon can help you make smarter and more efficient trades!



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NOTE: Stock and option trading involves risk that may not be suitable for all investors. Examples contained within this report are simulated And may have limitations. Average returns and occurrences are calculated from snapshots of market mid-point prices And were Not actually executed, so they do not reflect actual trades, fees, or execution costs. This report is for informational purposes only, and is not intended to be a recommendation to buy or sell any security. Neither Market Chameleon nor any other party makes warranties regarding results from its usage. Past performance does not guarantee future results. Please consult a financial advisor before executing any trades. You can read more about option risks and characteristics at theocc.com.


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