Alphabet is winning the AI revolution. Here’s how Mike Khouw is trading it
Alphabet (aka “Google”) is clearly firing on all cylinders, perhaps more cylinders than Street realises. The quarter was frankly a blast. Rising cloud revenue and rising capital expenditure (capex) guidance suggest that the company’s massive investments are potentially paying off faster than many (and even many within the company) expected.
The conclusion couldn’t be clearer: Alphabet is not only surviving the AI revolution, it’s leading it in many ways.
From where?
Because this company makes money even though its investments are huge Now in this area. Cloud and artificial intelligence were the undisputed stars of the quarter. Google Cloud continues to grow rapidly, capturing enterprise workloads as businesses accelerate their AI development. Demand for Gemini-powered services and AI infrastructure is outpacing even the most optimistic forecasts. In a supreme display of confidence, management raised its full-year capital spending guidance to up to $190 billion; It’s a jaw-dropping number that signals that Alphabet is playing for generational dominance, not quarterly optics.
Alphabet, YTD
So now how do you make money from this using options?
TRADE:
• Buy August 400 Strike calls
• June 350/420 Sell Strangle
• Difficulty level: Advanced
I prefer to buy the August $400 strike calls that capture the next earnings event, funded in part by selling the June 350/420 strangle. By selling the 350 put, one assumes the risk of having to purchase the stock at that strike price, but that is where the stock trades before earnings are announced. There are probably many investors who wish they had done this; This creates some pent-up demand at this level. Meanwhile, selling June 420 calls further reduces the cost.
In fact, this trade, although it requires a premium outlay, could be marginally profitable at expiration in early June, even if the stock remains unchanged so far until then.
Selling the 420s limits upside potential for now, but leaves open the possibility of selling further premiums against August calls after the June expiration, maintaining a modest bullish position that gives the stock some time to reset before returning higher.
