How I use options to trade GOOG

In

Part I
of this report, I made the point that substituting stock ownership
with a deep, in-the-money Call was a great way to play an expensive stock like
GOOG which easily met TripleScreenMethod (TSM) criteria: for fundamentals
(superior earnings growth and good earnings revision fuel), for value (’05 PEG
ratio at 0.43) and for technical pattern (multi-month “Cup & Handle”). Buying
shares was just too expensive.

Combining this long, deep in-the-money Call with a short, out-of-the-money
Call reduced the necessary cash outlay even further at a cost of giving up some
of GOOG’s upside. I call such an option position a “synthetic” covered call,
though more correctly, it’s referred to as a bullish debit Call spread.

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