Alphabet Shares Plunge 12% on Earnings Miss; Trader Pitches Short Strangle Instead of Rebound Bet

Alphabet (GOOGL) shares fell more than 12% to $285 this week after third-quarter earnings missed estimates, wiping out nearly $500 billion in market value. Options trader Mike Khouw proposed a short strangle to profit from range-bound trading rather than betting on a near-term rebound. Q3 cloud revenue jumped 103%, but earnings per share came in at $2.12 versus the $3.02 consensus, and heavy AI capital spending pushed free cash flow negative. Multiple research firms cut ratings, price targets or forecasts after the report; Khouw noted downgraded stocks often underperform or consolidate for roughly 30 days as institutions adjust positions. Technical damage is significant: RSI has fallen to the low 20s and MACD sell signals are strengthening. Khouw sees the 52-week low near $270.70 and extremely oversold conditions limiting further declines. His short strangle—selling a lower-strike put and a higher-strike call expiring December 18, 2026—aims to capture elevated post-earnings implied volatility and time decay, with the main risk a broader market selloff pushing shares below the $250 put strike.