[Options] Time to Get ON this one.
Check out this chart for ON Semiconductors $ON:
Is the fourth time at these levels a charm?
The options market is offering us a relatively cheap way to find out.
Here's JC:
After basing constructively for the past two and a half years, this $11B semiconductor stock looks poised to break out above it's all-time highs just below 27. If price is above 26.50, we want to be long ON Semiconductor with a 2-4 month target at 37.
$ON traded above $26.50 this week and is offering us a mild pullback to enter in at better prices. And options volatility is pretty low in this name. So with all-time highs so close and cheap options, this sets up my favorite play: Buying Long Calls. Keep it simple, slugger!
Here's the play:
I'm looking to buy $ON January 30 strike calls for $1.25 or cheaper. ASC has a 2-4 month price target at $37, so these 30 calls will give us plenty of runway to turn a big profit if it materializes.
Usually I prefer to buy call options with a 25 delta, but in this case, there is far more open interest at the 30 strike, so I'm going to choose the strike with the better liquidity.
If at any time during my hold $ON closes below $23.50 per share, then I'll look to close this position to salvage whatever premium is left (if any). And as always, if we head higher, I'll close half of my position when I can do so for twice what I paid, which will remove all of my original risk from the market and give me a free ride on the rest.
If you have any questions on this trade, please send them here.
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