Trade Alert - (AMAT) November 17, 2023

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) December 2023 $130-$135 in-the-money vertical BULL CALL spread at $4.30

Opening Trade

11-17-2023

expiration date: December 15, 2023

Portfolio weighting: 10%

Number of Contracts = 23 contracts

This is a short-term bullish trade on chip firm Applied Materials, Inc. (AMAT) that AMAT will stay above $135 in the next 28 days.

AMAT is down today because of a DOJ investigation, and I’m using this dip to execute an in-the-money bull call spread.

The semiconductor equipment maker is reportedly being investigated for evading export restrictions and sending advanced chipmaking equipment worth hundreds of millions of dollars to Chinese chipmaker SMIC without export licenses.

Citing national security concerns, the U.S. has imposed export controls curbing sales of advanced chips and chipmaking equipment to China. The Justice and Commerce Departments have also formed a task force to investigate and prosecute violations of these restrictions.

The news came as Applied Materials reported better-than-expected results, with fiscal fourth-quarter net income of $2 billion and earnings per share of $2.12, up from net income of $1.6 billion and earnings per share of $1.85 in the year-ago quarter, and above analyst estimates.

The chart looks great and AMAT is a strong company. I would characterize this as a great entry point short-term into a premium chip name.

The risk – reward in this situation is favorable to the upside.

Don’t pay more than $4.40.

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

Buy 23 December 2023 (AMAT) $130 calls at………….………$17.50

Sell short 23 December 2023 (AMAT) $135 calls at………….$13.20

Net Cost:……………………..…….………..…….............................$4.30

Potential Profit: $5 - $4.30 = $0.70

(23 X 100 X $0.70) = $1,610 or 16.28% in 28 days

If you are uncertain about 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.

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