CNBC's Jim Cramer calls Google Inc. (NASDAQ: GOOG) the "steal" of the tech group, as it he believes it is undervalued and cheap versus the rest of the sector, gaining market share from Yahoo (NASDAQ: YHOO), growing tremendously as always, and selling at only one times its growth rate. If you are inclined to agree, then it could be a good time to get into a bullish hedged trade on GOOG.
After hitting a one year high of $558.58 in July, the stock has dipped slightly over the past six weeks. GOOG opened at $523.40 and has hit a low of $522.25 and a high of $526.74 so far. As of 11:15, GOOG is trading at $523.83, down $1.32 (-0.3%). The chart for GOOG looks neutral and improving, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.
If you agree with Cramer, then for a bullish hedged play on this stock, I would consider a September bull-put credit spread below the $480 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 4.2% return in just 2 weeks as long as GOOG is above $480 at September expiration. Google would have to fall by more than 8% before we would start to lose money. Learn more about this type of trade here.
GOOG hasn't been below $480 since May and has shown support around $510 recently. This trade could be risky if the broad markets crash over the next two weeks, but even if that happens, this position could be protected by support around $485, where GOOG bounced in August, plus its 200 day moving average, which is right around $490 and rising.
Brent Archer is an options analyst and writer at Investors Observer. DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in GOOG.
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