When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline.
Tech Alert - Applied Materials, Inc. (AMAT) –TAKE PROFITS
SELL Applied Materials, Inc. (AMAT) February 2022 $110 - $115 in-the-money vertical BULL CALL spread at $4.95
Closing Trade
2-9-2022
expiration date: February 18, 2022
Portfolio weighting: 10%
Number of Contracts = 25 contracts
This trade has not only been a home run but a grand slam.
We executed a deep-in-the-money bull call spread at the height of volatility when Applied Materials (AMAT) was trading in the mid-$120s.
Since then, semiconductor stocks and the rest of tech have exploded to the upside making this trade that was quite aggressive at the time look like easy pickings.
We ended up stomping out our TXN call spread because of bad price action, but even that has reversed sharply.
AMAT is up over 3% and rising this morning and the risk/reward of holding until maturity isn’t worth it. We are taking profits and leaving 5 cents on the table for the next guy.
Why like AMAT?
Applied Materials is one of my favorite semiconductor fab companies and we did a few call spreads in this name last year with great success.
There’s not much to dislike with AMAT.
They boast a quarterly EPS of around $2 and last year scratched out $6 billion in profits. In short, they make a lot of money for what they do, and they are good at what they do, never a bad thing in a trading environment where balance sheets finally matter after a generation of easy lending to zombie companies.
This is really the gold standard of chip manufacturing services, at a time when every tech company is clamoring for more chips, including China, and I will hide out in strong balance sheets until the trading environment becomes more favorable to riskier companies.
I, therefore, bought the Applied Materials (AMAT) February 2022 $110-$115 in-the-money vertical Bull Call spread and am now taking profits.
Here are the specific trades you need to exit this position:
Sell to Close 25 February 2022 (AMAT) $110 call at....………$32.80
Buy to Close 25 February 2022 (AMAT) $115 call at………….$27.85
Net Proceeds:……………………..…….………....................…….....$4.95
Profit: $4.95 - $3.85 = $1.10
(25 X 100 X $1.10) = $2,750 or 28.57%
If you are uncertain on how to execute an options spread, please watch my training video by clicking here.
The best execution can be had by placing your bid for the entire spread in the middle market and waiting for the market to come to you. The difference between the bid and the offer on these deep in-the-money spread trades can be enormous.
Don’t execute the legs individually or you will end up losing much of your profit. Spread pricing can be very volatile on expiration months farther out.
Keep in mind that these are ballpark prices at best. After the alerts go out, prices can be all over the map.
