After a tremendous bounce in equity markets, I want to prepare for additional volatility, specifically in chips. This volatility of volatility forces me to be cautious after any outsized movements, yet I welcome opportunities of more-than-likely additional acute moves this month. I am expressing a bearish view in chip stocks as I expect significant negative price action to persist in the VanEck Semiconductor ETF . SMH has had an historic recovery in the last two weeks of trading sessions.
has to back-n-fill lower in order for my bearish view to work out in the next few weeks. There is risk in this as Nvidia's second quarter earnings report will be released on Aug. 28. This uncertainty fortifies the fact that I have to define the risk in my view and that is why I want to buy a put spread in SMH. The Trade Bought the SMH $242.50 put for $6.25 Sold the SMH $232.50 put for $3.00 This put spread costs $3.25 of $325 per one lot spread SMH was trading roughly $245.
has another gangbusters earnings report, this trade will expire worthless. However, if SMH moves lower, this $10 spread will fill out and an investor will profit $675 from each one lot spread . All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY .
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