SMH: Money Where My Mouth Is
After long having a bearish outlook toward semiconductor stocks, I recently started noting more favorable indicators. While I am not quite turning bullish, I am becoming not-bearish. And now I am putting my money squarely in the not-bearish camp by selling naked put options on the SMH at $35.
If the semiconductor ETF falls below $35 (it was just below $36 when I wrote the option) before mid-July I could be forced to buy it for $35. If not, I will pocket a $50 premium (net of commission) for taking the risk. This is in line with my not-bearish position because if I were bullish I would be buying the SMH at current levels or buying call options. I am basically saying that I don’t think it will go below $35 and that at any rate I would be willing to own it for a net $34.50 if need be.
Those of you who were recently criticizing my bearishness can consider this your contrarian signal to get out. Or not.
Disclosure: William Trent has a long position in SMH.
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[...] SMH: Money Where My Mouth Is [...]
Interesting, I didn’t realize you sold naked options on occassion. I sold a few of the SMH July 35P myself on 5/22/07, but only for $0.39.
What is your analysis of TXN midquarter update? I sold some July 35 straddles (both put and call) and was thinking about buying the position back tomorrow and taking profits. I sold them on 4/24 and received $3.10.
Josh,
Thanks. So far I am dabbling in options as one would expect from an equity guy – mostly selling them to collect the premium when a stock is almost cheap enough to buy or almost expensive enough to sell. I have a couple of long options positions too. No naked calls, though.
The TXN was more or less as I thought it would be. Not too good, not too bad. I think the companies are adjusting to the reality that they ordered too much capacity, and are making things right. Since the stock market generally looks ahead I think any remaining down legs will be relatively short and would be willing to ride them out. The cycle played out in the stocks earlier than usual, it seems to me (unless I am wrong now, it was late and things will crash in the next couple of months).