Trade Alert - (MU) May 4, 2021 - SELL-STOP LOSS
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 - Micron Technology, Inc. (MU) – STOP LOSS
SELL Micron Technology, Inc. (MU) May 2021 $80-$83 in-the-money vertical BULL CALL spread at $1.90
Closing Trade
5-4-2021
expiration date: May 21, 2021
Portfolio weighting: 10%
Number of Contracts = 39 contracts
Micron (MU) is a 5G play and this was a trade that the underlying stock would stay above $83 by May 21st expiration.
Just to remind readers, I took profits in MU call spreads in Feb & April already and the third time tripped us up as we are at all-time highs in the Nasdaq and we are running against a wall attempting to continue to the next leg up.
Today is a full-fledged risk-off move in the Nasdaq with the index down more than 2% and technology names selling off indiscriminately.
The velocity of the down move is a negative sign that capital is rotating out of tech stocks.
The price action has been poor in MU as rallies have been sold and it's time to dump this stock and take a loss.
For long time buy and hold investors, keep this one, this is just a transitory sell-off and will pass by.
Why do we like MU?
2021 could turn out to be a blockbuster year for Micron's mobile business, as sales of 5G smartphones are expected to explode.
The chipmaker estimates that 500 million 5G smartphones could be consumed in the new year, as compared to 200 million units in 2020.
Micron is strategically placed to take advantage of this accelerating growth.
Micron CEO Sanjay Mehrotra boasted that Micron “achieved a record number of design wins in fiscal Q4.”
Micron is poised to win in the 5G era as a supplier to all the major smartphone manufacturers, with an outstanding portfolio of industry-leading low-power DRAM and managed NAND solutions.
If you do not trade options, I have recommended buying the equity in the stock pretty much the entire year so far from when the stock was in the low $70s.
My end-of-year target is $125 so hold the stock.
Here are the specific trades you need to exit this position:
Sell to Close 39 May 2021 (MU) $80 calls at………….………$4.60
Buy to Close 39 May 2021 (MU) 83 calls at…...........……….$2.70
Net Proceeds:……………………..…….………................…….....$1.90
Loss: $2.48 - $1.90 = $.58
(39 X 100 X $.58) = $2,262 or 23.3%
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.