Trading the chip stock bounce

Michael Shulman

The torrid trading in tech stocks continues as stock market bounces back from the 4th quarter 2018 sell-off.

The tech sector is led by the microchip stocks that keep giving option sellers very rich paydays.

We went back to trade a favorite chip stock of mine. Micron Technology [stock_market_widget type=”inline” symbol=”MU” template=”basic” color=”default”] is a pure play on NAND flash memory — the memory chips that go into mobile devices such as smartphones and tablets, thumb drives and, increasingly, laptops.

Chip stocks were hit hard in November and December 2018. But MU is grossly undervalued compared to other tech outfits. It is also quite volatile due to Wall Street’s more than frequent overreaction to spot prices for chips…

…and that makes it a great income trading opportunity for option sellers.

We opened a short-term position to generate cash…selling the MU March (3/29) 42 put in May and collected $57 per contract.

Just after we opened the trade, good news from two other semi-conductor stock earnings reports came out and Micron’s stock price popped. It was an easy decision to take profits early buying back our option for $.05 and pocketing a $51 of cash in just 13 days.

And, my Options Income Blueprint members typically trade 3 contracts per trade…so that’s fast $153 of profit and a 1.4% return in just 13 days!

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About The Author

Michael Shulman is a 30 Year Veteran of the financial markets – as a trader, a financial analyst, a financial writer and most recently as an educator.

Mr. Shulman made his first option trade in 1985 – COMPAQ Computer calls – a position that expired worthless. His second trade broke even; the third brought him a year’s salary, a near twenty to one return on his investment. Michael has never looked back. He entered the financial publishing business formally in 2001 as director of research for ChangeWave Research’s institutional research business and as the writer and editor of Hedge Fund Investing.

He has published two books – Sell Short and Made in America – both of which can be found on Amazon.com, and he is a frequent contributor to reputable financial sites like Seeking Alpha, MSN, MainStreetInvestor, and Traders Reserve.

His trade recommendations in his Options Income Blueprint, Perpetual Income Portfolio Club and Income Masters services maintain a 98% success ratio, meaning his trades produce the expected income 98% of the time. No one’s perfect.

 

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