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) – BUY
BUY Applied Materials, Inc. (AMAT) February 2022 $110 - $115 in-the-money vertical BULL CALL spread at $3.85
Opening Trade
1-28-2022
expiration date: February 18, 2022
Portfolio weighting: 10%
Number of Contracts = 25 contract
Applied Materials is one my favorite semiconductor fab companies and we did a few call spread 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.
Although I expect this market selloff to continue for weeks, if not months, the biggest declines are behind us. When markets bottom out, the big money will pour back into the best quality names, especially AMAT.
I am therefore buying the Applied Materials (AMAT) February 2022 $110-$115 in-the-money vertical Bull Call spread for $3.85.
Here are the specific trades you need to execute this position:
Buy 25 February 2022 (AMAT) $110 calls at………….………$20.20
Sell short 25 February 2022 (AMAT) $115 calls at………….$16.35
Net Cost:…………………….....................…….………..…...….....$3.85
Potential Profit: $5 - $3.85 = $1.15
(25 X 100 X $1.15) = $2,875 or 29.87% in 21 days
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.
