Trade Alert - (AMAT) November 16. 2021 - SELL-TAKE PROFITS

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) – SELL TAKE PROFITS

SELL TAKE PROFITS Applied Materials, Inc. (AMAT) November 2021 $123-$128 in-the-money vertical BULL call spread at $4.98

Closing Trade

11-16-2021

expiration date: November 19, 2021

Portfolio weighting: 10%

Number of Contracts = 24 contracts

This was a short-term bet that chip fab operator Applied Materials, Inc. (AMAT) would stay above $128 by November 19th expiration, and we hit a home run on this trade.

The underlying stock has done nothing except go up since we executed this trade, and the stock is hovering around $158 today.

AMAT has earnings report coming up a day before expiration, so we are taking profits here to protect our profits.

Semiconductor foundries are at the forefront of the supply constraints and the foundries are spending billions of dollars to upgrade and expand their production lines. As a result, semiconductor capital spending is expected to increase 13% in 2021 to $127 billion as per a third-party estimate.

Industry association SEMI estimates that the higher capital spending will lead to a massive jump in the sales of semiconductor manufacturing equipment this year. Around $95 billion worth of semiconductor manufacturing equipment is expected to be sold in 2021, which would be a 34% increase over last year. In 2022, SEMI forecasts that spending on chip fabrication equipment could hit $100 billion.

The company's outlook for $6.33 billion in revenue this quarter represents a 35% year-over-year increase from $4.69 billion in the fourth quarter of fiscal 2020. AMAT is an industry leader and I like the stock short and long term.

Here are the specific trades you need to exit this position:

Sell to Close 24 November 2021 (AMAT) $123 calls at….………$35.10

Buy to Close 24 November 2021 (AMAT) $128 call at………….$30.12

Net Proceeds:……………....................………..…….………..…….....$4.98

Profit: $4.98 - $4.15 = $.83

(24 X 100 X $.83) = $1,992 or 20.00%

 

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.