Why This Trade?
Google (GOOGL) has been struggling to gain momentum after a strong rally, currently trading at $190.86 (-0.25%). Recent concerns over higher capital expenditures and weaker-than-expected cloud growth have weighed on sentiment. While the long-term outlook remains strong, near-term headwinds suggest limited upside in the coming months.
That’s where a bear call spread comes in—a strategy designed to generate income while limiting risk, as long as GOOGL stays below a key resistance level.
The Strategy Breakdown
A bear call spread (also known as a short call spread) involves selling a call option at a lower strike price and buying another call at a higher strike price to hedge against potential upside risk.
Trade Setup (May 16, 2025 Expiration):
- Sell 1 GOOGL $200 Call
- Buy 1 GOOGL $210 Call
- Net Premium Collected: Varies based on market conditions, but aims to provide an attractive risk/reward setup.
📉 Max Profit: Limited to the net premium received. This happens if GOOGL closes at or below $200 at expiration.
📈 Max Loss: Capped at the difference between strikes ($10) minus the premium collected. Loss only occurs if GOOGL surges past $210.
Risk Management & Adjustments
What Could Go Wrong?
- If GOOGL breaks above $200, traders need to monitor for signs of bullish continuation.
- If momentum builds toward $210, closing the spread early may be necessary to cut losses.
Adjustments:
- Rolling the spread: If GOOGL nears $200 early, rolling up to a higher strike can help reposition while maintaining premium income.
- Stop-loss threshold: Consider exiting the trade if losses exceed 50% of the maximum risk to preserve capital.
Who This Trade Is For
🔹 Traders expecting sideways or mild bearish movement in GOOGL.
🔹 Options traders looking for a defined-risk strategy with limited downside exposure.
🔹 Income-focused traders who want to capitalize on time decay and stagnant price action.
This is not a strategy for traders expecting a major breakout above $200 in the next few months. If GOOGL unexpectedly surges, the trade will require close monitoring.
The Trader’s Take (Ava’s Perspective)
A bear call spread makes sense when a stock faces resistance and lacks near-term catalysts for a breakout. With GOOGL struggling to hold above $190 and sentiment cooling, this trade offers a high-probability way to profit from limited upside movement.
The key here is controlling risk while taking advantage of time decay. Even if GOOGL remains flat, this trade benefits as long as it stays under $200. Just be ready to adjust if momentum shifts.
Would I take this trade? Yes—but only with proper risk management. If GOOGL shows renewed strength, I’d cut losses early and reassess. Smart traders stay nimble.
GOOGL