How to Double Your Money with Google

Keith Fitz-Gerald Oct 21, 2016
13 

When I called my editor and told him that I was going to write today’s column showing you how to double your money with Google (now known as Alphabet, NasdaqGS:GOOG), he reacted like many investors do…

…But, that stock is $800 a share!!??

Yep… but that doesn’t mean you have to give up on it.

Today I want to show you a powerful Total Wealth Tactic that could double your money even with a pricey stock like Google… for pennies on the dollar.

Here’s what you need to know.

Make 2X Your Money

Most investors dream big, and rightfully so.

Companies like Google are the stuff legends are made of. Every $1,000 invested in the Internet behemoth when it IPO’d would be worth $18,800.00 today.

If you’re rolling your eyes at that statement, you’re not alone.

For most investors, Google is a painful reminder of an investment they should have made, but didn’t. It’s the “one that got away” and they’re scared to touch it today… either because they think they don’t have time to wait, or it’s too expensive.

I understand, but let’s get those things off the table right now because they’re self-defeating.

If you’re going to make investment decisions based on what you didn’t do, then you may as well try to drive while looking out the rear view mirror.

Google is a power player and, as such, it’s the company to beat.

Not only is the Silicon Valley giant redefining the Internet, but Google has 10 or more $100-billion businesses within it that have yet to be unlocked, involving everything from artificial intelligence to cloud computing, self-driving cars, and more. That means the stock is going to move.

But, in which direction? And how do you play that at $800 a share without getting burned?

A quick look at the chart suggests Google is trending higher in what traders call a “bullish channel.” It’s not pretty, but it’s quite clear and it points sharply higher. What’s more, that’s on top of a textbook perfect breakout earlier this week when the stock shot up to close at an all-time high of $801.50 after trading as high as $804.63.

chart

That’s important because the first step in making any trade is to have an opinion about what happens next. In this case, it’s that Google is going to move higher.

My guess is to the psychologically important $1,000 a share range, and that means you’re going to have to have deep pockets to play along.

A single share will set you back around $800. A round lot of 100 shares will lighten your wallet to the tune of $80,000. Either way, you’ll be risking a lot of money for a 25% gain.

So let me show you an alternative that could do dramatically better.

The trade I’m going to share with you today is known as a “vertical call spread.” It involves simultaneously buying and selling two different call options and it has the potential to double your money even if Google moves just $10.

In this case, you’d buy the November $805 strike calls and sell the November $810 strike calls for a total cost of $2.40 per share, or $240 per spread. If Google closes at or above $810 on November 18th, this trade will be worth $500 per spread which means you will have made 108% on your money, excluding fees and commissions for simplicity.

green-details

Not bad, eh?

I particularly like vertical call spreads because they help keep risk to razor thin levels. That’s obviously very important in today’s markets, which is why they’re such a powerful Total Wealth Tactic.

Instead of risking the $80k that’d be required for 100 shares to make 25% if the stock moves to $1,000 a share, this trade means you’ve got $240 per spread on the line and you’d only need a ~$10 move to double your money. Buy 10 spreads and your total risk is still only $2,400.

If you’re starting to get a wry grin on your face as you consider the profit potential, that’s good… because here’s something else that’s very important.

Learning how to use vertical call spreads means that you’ll never have to go “all in” like the vast majority of investors do. Most people think only about the potential to capture a 100% gain, but the real magic in a trade like this one is that you’ll never inadvertently risk a catastrophic wipeout again because you can trade with far smaller blocks of capital.

What’s more, vertical call spreads are cheap – meaning they’re inexpensive. That gives you the ability to assemble a much broader portfolio than would otherwise be possible. Plus, you’ll still have the kind of potential that puts a huge Cheshire-cat grin on even the most jaded investors’ faces.

And, if you’re wrong? That happens to everybody sooner or later if you are in the markets long enough.

The key with vertical spreads is that you know what you are risking to the penny every time. There is no guessing and no emotional decision making in the heat of battle like there would be when stock is going against you.

Last but not least, vertical call spreads like the one I’ve described can be a great way to participate in trades you couldn’t otherwise afford to touch. There are more than 3,000 optionable stocks to choose from in every industry and segment you can imagine. There are even optionable indices and ETFs, if that’s more your speed.

Now, I can hear your brain clicking… what about stocks that are going down?

That’s a great question, and a relevant one at the moment.

Vertical spreads work in reverse, which means that you can apply the thinking I’ve shown you today to stocks that are going down or about to go down, too. Only then you’ll be buying a vertical put spread, which I’ll save for another time and another column.

What I want you to understand today is that expensive stocks like Google are still tradable. They’re not out of reach like most people think and the media would have you believe. Best of all, they can still be a source of huge profits.

In closing, a special note.

Options require pre-approval from your broker. You can’t just pile in or pile on. Like every investment, they involve the potential for loss, so you want to make sure you understand what you’re getting into.

Fortunately, that’s usually a fairly simple and straightforward process depending on your knowledge, what you want to trade, and the strategies you intend to use.

Speaking of which, sometimes a double isn’t good enough. I’m actually tracking a few trades using this strategy that could quintuple your money…

…and I’ll share those with you in the weeks ahead.

Until next time,

Keith

13 Responses to How to Double Your Money with Google

  1. Ralph Auricchio says:

    I received your Total Wealth report today on how to double your money on Google using vertical call spreads. As occurs with many of the recommendations, the numbers you state are way different than what the market prices are. Is their a significant delay from when you write the recommendation until it is sent out to the subscribers?

    • Keith says:

      Hi Ralph.

      As much as I would like to issue Total Wealth in real time, the publication process requires that I submit my stories several hours ahead of time which means, of course, that prices can change. If you’re interested in more real time information and trading opportunities, may I respectfully suggest that you consider our paid services as an alternative.

      Best regards and thank you for being part of the Total Wealth Family, Keith 🙂

  2. R. J. says:

    Looking at the Nov. 04 expiration (with serious time decay of 13 days) there’s a $1.40 net debit: buy $805 call; sell $810 call.

    GOOG is currently $799.39.

    My buy call is OTM and has to break $805 for it to be ITM to close and sell for profit.

    Within 13 days?

    Should we look further out (at more expense) to the 11th, 18th, or 25th?

    The stock could also spurt up to $815…and my sell call could be exercised. Or would I close the trade before that happened?

    I assume that I could place stops on the buy and call?

    Please clarify.

    Thank you.

    🙂

    • Keith says:

      Good morning RJ.

      You continue to impress me to no end. I am watching you accumulate knowledge at light speed and it’s fabulous!

      You are on the right track. Thirteen days is definitely tight at this point so going out a few expirations would give you more time to let the trade play out. The tradeoff, of course, is that this setup becomes more expensive because you have to buy “time” in addition to price. Keep in mind that you could also use the bull call approach with a different stock. For instance, Microsoft or Facebook come to mind.

      Now, I see you’ve also referenced weekly options with alternative expiration dates. A lot of people like those but I’m old school and prefer sticking to the monthlies where there is more liquidity. Opinions are like belly buttons, though. Everybody has one. You may find they work just fine for you given your individual risk tolerance and objectives.

      And, finally, you reference setting stops on the two call options separately. You can do that but I’d strongly recommend you regard them as a combined position. Most options software will let you track a “bull call spread” that way and it can dramatically simplify things. Plus, floor traders frequently take combis – spreads – whereas they may not fill a single as it gets closer to expiration. Something to think about as it relates to risk management.

      Keep up the great work and the learning, too.

      Best regards and thanks for being part of the Total Wealth Family, Keith 🙂

  3. Peter Lee says:

    I’m lost. What is “paid Service”?

    • Jessica Sheppard says:

      Hi, Peter!

      Great question! Money Map Press provides subscription-based services to those readers who are interested in more in-depth research and trading techniques. As a VIP subscriber, you’d receive exclusive access to Special Reports, weekly portfolio updates and recommendations, and an exclusive Member Services team to walk you through any questions! Total Wealth is a great start… paid services just take it up a notch!

      Keith, for example, offers two services: the Money Map Report, and High Velocity Profits. Feel free to check both of those out, and don’t hesitate to reach out to our Customer Service team with more questions! Their number is: 888-384-8339

      We look forward to hearing from you again, and thanks for being a part of the Total Wealth Family!

      Jessica Sheppard
      Associate Editor

  4. osmond anderson says:

    You are a gem in a haystock keith. Thank you kindly for the timely information. I am learning more and more everyday. With this wealth of information and am destined to become wealthy.

    • Keith says:

      Hello Osmond and thanks for the kind words.

      I will do everything I can to ensure that your trust in me is well placed, and that you build all the wealth you’d like… and then some.

      Best regards and thanks for being part of the Total Wealth Family, Keith 🙂

  5. Greg Johnson says:

    Hi Keith,
    All you guys have great insight. I would certainly love to be a life member if I could just make the money to pay you. Back in August I paid $2,000 to be part of XXX’s program and I’m just taking a bath, down $10,000. I can’t help but feel trapped. I’m hoping you can get me back in the game. Thanks for listening.

    • Keith says:

      Hello Greg and thanks for the kind words. I try very hard to bring my A-game every day and I am thrilled that it comes through.

      As for XXX, that’s unfortunate and I am sorry to hear that. It’s no fun to watch something go against you.

      I will do everything I can to “get you back in the game” – from picking the best opportunties I can find, to helping you understand and apply proper risk management to every investment you have, not just the recomendations you read about here. Even I can recommend a bummer every once in a while although I try very hard not to.

      Best regards and thanks for being part of the Total Wealth Family, Keith 🙂

  6. bouamama hassene says:

    a mossieur merci

    • Keith says:

      Cher Hassene,

      De rien. J’espere que vous appreciez Total Wealth. Bienvenue a la famile.

      Meilleures salutations, Keith 🙂

  7. sue says:

    Could you please explain how this unwinds?
    If the stock rises $10 then the call you bought – the 805 strike price – will rise in value.
    However the 810 call will also rise in value and you are on the hook to deliver shares at 810.
    So how do you get to the 108% Profit made?
    Thanks in advance for an explanation.

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