Option Strategy | Alphabet Shares Come Under Pressure as Capex Guidance Raises Concerns: How to Navigate With Options

Shares of Alphabet have been trading lower amid heightened volatility. On Thursday, the stock fell nearly 2% to close at $333.04, and slid a further 1.5% in after-hours trading following the release of the company’s fourth-quarter earnings. Over the past week, Alphabet’s Class A shares have remained under pressure, broadly in line with a pullback across the software sector and weakness in the Nasdaq Composite.

Alphabet’s fourth-quarter results exceeded market expectations, with cloud revenue posting robust year-over-year growth of roughly 48%. However, management’s decision to sharply raise its capital expenditure guidance for 2026—nearly doubling prior levels—sparked concerns over future free cash flow generation and the timeline for investment returns. This capex outlook has become the primary near-term drag on the stock.

At the sector level, earnings-related declines in peers such as Qualcomm and Arm have weighed on sentiment, with chipmakers and software stocks broadly underperforming and reinforcing risk-off positioning within the technology complex. Adding to the sense of divergence among megacaps, Apple’s market capitalization surpassed Alphabet’s last week, highlighting uneven performance across the sector.

Balancing Upside Potential and Downside Risks

On the positive side, Alphabet’s long-term growth drivers remain intact, led by strong momentum in Google Cloud and generative AI. Cloud revenue continues to expand at a rapid pace, while accelerating adoption of enterprise AI infrastructure and applications is expected to support sustained top-line growth and margin expansion over time. Meanwhile, the company’s core advertising franchises—Search and YouTube—remain resilient, benefiting from scale advantages and ongoing improvements in operating efficiency. These factors could help offset the near-term free cash flow pressure associated with elevated capital spending.

If management can further clarify the commercialization path for AI and cloud investments while maintaining constructive growth guidance, the stock may see a tactical rebound.

That said, near-term headwinds are clearly defined. The market’s negative reaction to the sharp increase in capex reflects investor unease over the visibility and timing of returns on large-scale investments. This uncertainty may continue to weigh on valuation multiples in the short run. Broader weakness in the technology sector and disappointing post-earnings performance among peers further compound external pressures. While Alphabet’s long-term growth narrative remains compelling, near-term earnings and cash flow strain tied to heavy capital spending remains the key source of uncertainty.

Options Strategy Analysis

Implied volatility (IV) for Alphabet Class A options currently stands at approximately 45.85%, near the 92.83rd historical percentile, indicating relatively expensive option pricing. In such an environment, spread-based strategies can help express directional views while managing both cost and risk.

I. Bullish Strategies: Long-Term Cloud and AI Upside, Managing Near-Term Volatility

Strategy 1: Bull Call Spread

• Structure: Buy a Feb. 13, 2026 $335 call; sell a Feb. 13, 2026 $340 call

• Net Cost: ~$2.275 per share

• Maximum Profit: $2.725 per spread (stock ≥ $340)

• Maximum Loss: $2.275 per spread (stock ≤ $335)

• Breakeven: $337.275

Rationale: This strategy suits a moderately bullish outlook, targeting a limited upside move. Selling the higher-strike call reduces upfront cost while capping both upside and downside within the $335–$340 range.

Strategy 2: Bull Put Spread

• Structure: Sell a Feb. 13, 2026 $340 put; buy a Feb. 13, 2026 $335 put

• Net Credit: ~$2.725 per share

• Maximum Profit: $2.725 per spread (stock ≥ $340)

• Maximum Loss: $2.275 per spread (stock ≤ $335)

• Breakeven: $337.275

Rationale: This approach also reflects a moderately bullish bias but is constructed through premium collection. It is suitable for scenarios where the stock is expected to hold steady or rise, with downside risk hedged via the long put.

II. Bearish Strategies: Hedging Against Capex-Driven Pullbacks

Strategy 3: Bear Put Spread

• Structure: Buy a Feb. 13, 2026 $330 put; sell a Feb. 13, 2026 $325 put

• Net Cost: ~$2.50 per share

• Maximum Profit: $2.50 per spread (stock ≤ $325)

• Maximum Loss: $2.50 per spread (stock ≥ $330)

• Breakeven: $327.50

Rationale: Designed for investors anticipating a limited downside move, this strategy offsets part of the put purchase cost by selling a lower-strike put, thereby capping both risk and reward.

Strategy 4: Bear Call Spread

• Structure: Sell a Feb. 13, 2026 $330 call; buy a Feb. 13, 2026 $335 call

• Net Credit: ~$2.50 per share

• Maximum Profit: $2.50 per spread (stock ≤ $330)

• Maximum Loss: $2.50 per spread (stock ≥ $335)

• Breakeven: $332.50

Rationale: This strategy is suitable for expectations of downside or sideways consolidation. Premium is collected by selling a call, while the higher-strike call caps upside risk.

III. Neutral Strategy: Range-Bound Trading Amid Uncertainty

Strategy 5: Iron Butterfly

• Structure:

  • Buy a Feb. 13, 2026 $325 put

  • Sell a Feb. 13, 2026 $330 put

  • Sell a Feb. 13, 2026 $335 call

  • Buy a Feb. 13, 2026 $340 call

• Net Cost: ~$1.00 per share

• Maximum Profit: $4.00 per spread

• Maximum Loss: $1.00 per spread

• Profit Range: Stock between $326 and $339

Rationale: In a high-volatility environment, this strategy is well suited for investors expecting the stock to trade within a relatively narrow range. By selling near-the-money options and purchasing farther out-of-the-money options for protection, the strategy aims to benefit from time decay while limiting tail risk.

Options trading involves significant risk. The above analysis is based on market conditions at a specific point in time, and profit-and-loss figures are approximate. Actual results may vary depending on real-time volatility, liquidity, and individual risk tolerance. Investors should adjust position sizing accordingly and consider using limit orders to manage execution risk.