TQQQ | MU
Original Publish Date: July 20, 2018
As the coined term “trade wars” continue, investors appear to be less skittish with the escalating rhetoric between the United States and China. Part of our greater strategy is to utilize buy-writes on securities that have a bullish momentum to add a stabilizing arm to our portfolio which currently factors in a rather neutral market outlook. By writing weekly ATM calls, we are able to pull .08-2+% a week while putting to work part of the excess of cash in our portfolio. 2 such contenders we have identified for July 27, 2018 are TQQQ and MU.
We are currently long TQQQ at a price of $64.57. By writing $64.5 calls for July 27, we are able to garner $1.57 worth of premium. This translates to a return of 2.3% a week. We see possible downside to a support level of $62.86. However, at Friday’s close, the $64.5 calls have a 52% chance of being exercised while the odds of reaching the first support level is 34%.
We are currently long MU at a price of $56.13. By writing calls at a strike of 56.5 we are able to pull $0.54 worth of premium. This translates to a return of 1% a week. As of Friday’s close, we are currently testing the first support level of $55. Should we break support, we see a secondary level of $53. MU is currently trading for 5.6x earnings, carries zero debit, and has most recently posted better than expected earnings while continuing to report stellar sales growth. We believe the fears of Chinese memory companies expanding into Micron’s territory are slightly inflated. We are looking for a bounce to the resistance level of $58 – an increase of 5.1% from Friday’s close. Currently the $56.5 calls carry a 31% chance of execution while our secondary support level maintains an 80% chance of avoidance.
Disclosure: I am/we are currently long on TQQQ and MU.
This article expresses my own opinions. I am not receiving compensation for this article – other than from Honey Investments. I/we have no business relationship with any companies whose stock is mentioned above.