Trade Alert - (KLAC) August 6, 2019

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 Trade Alert - (KLAC) – BUY

BUY the KLA Corporation (KLAC) September 2019 $150-$155 in-the-money vertical BEAR PUT spread at $4.15 up to $4.50

Opening Trade

8-6-2019

expiration date: September 20, 2019

Portfolio weighting: 10%

Number of Contracts = 22 contracts

KLA Corporation (KLAC) designs, manufactures, and markets process control and yield management solutions for the semiconductor and related nanoelectronics industries worldwide.

It just so happens that they procure 44% of total revenue from Greater China and that isn’t something to be all that happy these days.

We could be hours from the next tweet that bulldozes the chip industry.

KLAC popped on its earnings surprise of 4.09%. A quarter ago, it was expected that this maker of equipment for manufacturing semiconductors would post earnings of $1.63 per share when it actually produced earnings of $1.80, delivering a surprise of 10.43%.

With one little tweet, the state of technology and the companies that rely on the public markets that serve them went haywire.

U.S. President Donald Trump levied another 10% on the $300 billion that had not been tariffed up yet compounding the misery for anyone who has any vested interest in trade with mainland China.

The tariffs will take effect on September 1st.

How does this shake out for American technology?

Any brand tech name that has substantial supply chain operations can kiss their stay in the Middle Kingdom goodbye.

If management didn’t understand that before, then it's clear as night that they need to shift their supply chain out of the reaches of the Chinese communist party.

Don’t pay more than $4.50.

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

Buy 22 September 2019 (KLAC) $155 puts at ………….………$20.55

Sell short 22 September 2019 (KLAC) $150 puts at………….$16.40

Net Cost:…….…....................……………..…….……….......…….....$4.15

Potential Profit: $5.00 - $4.15 = $0.85

(22 X 100 X $0.85) = $1,870 or 18.70%

To see how to enter this trade in your online platform, please look at the order ticket below, which I pulled off of Interactive Brokers.

If you are uncertain on how to execute an options spread, please watch my training video on “How to Execute a Vertical Bull Call Spread” 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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