[Options] These Semis Keep on Truckin'
New all time highs? check.
Relative strength breakout? check.
Here's Steve Strazza:
Not only is KLA trading at fresh record highs after recently eclipsing its September high, but it also just broke out of a 20-year base vs the broader market and is now trading at all-time relative highs as well. We want to be long if we’re above 230 with a 3-6 month target at 304.
I love these types of setups. And with options volatility very tame in these options right now, we want to be long buyers of options. If you have the stomach for the risk (cost), buying straight long calls here is a smart edge play. However, I'm going to utilize a spread to increase my odds of seeing a profit.
Here's the Play:
I like a $KLAC June 250/300 Bull Call spread for any price less than $16.00. This means I'll be long the 250 calls and short an equal amount of 300 calls for a net debit which represents the most I can lose in this trade (I'll size my position accordingly).
My bet is the $300 price level will act as a magnet for this stock. My profit target on this play is simple: I'm just looking to double my money. If/when I can exit this spread for $32.00, I'll take it off and redeploy my profits into a new opportunity.
However, if the move we're looking for doesn't materialize, a $KLAC close below $223 per share is my signal to exit the trade for whatever I can get. While I'm comfortable losing 100% of my invested capital in this trade, I'd rather not if I can avoid it.
ASO subscribers with any questions on this trade, please send them here.
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