Bullish Trade Alert: Advanced Micro Devices Inc. (AMD) 5-28-24

Edge:  The entire semiconductor group as well as the technology sector are all the strongest areas of the market currently.   With the strong earnings performance from Nvidia,  all other names within the group could perform well in sympathy.   This stock particularly has room to run as it is beginning to break trend and move higher above its moving averages. With earnings news behind this stock and implied volatility at lower than normal levels, long calls are appropriate. This allows having more than one target which makes sense since it’s unclear how long the rally in this group will continue. 

 

I will use the at-the-money strike in the hopes that there is an increase not only in price but also volatility.  Vega is best captured using this selection. I will also go out more than 30 days in expiration in order to avoid excessive Theta decay even if I don’t plan on being in this trade for that long.

 

Target: $180 and potentially higher.

Entry: Current levels are okay as long as stock remains above its 50 and 20-day moving averages.

Time frame: Until target is reached,  but will evaluate overall market conditions  as it nears the first target to assess whether to stay in the trade for longer and pick a secondary target between $190 and $200.

Stop: I will use a 40% maximum premium loss as my hard stop.  I will consider an early exit if the edge disappears,  the overall market deteriorates,  or if technical damage is done to the charts like a broken trend below moving averages.

Sizing:  I will use full risk size for this trade since earnings have passed and volatility is low.  as a guideline that is generally 1 to 2% maximum loss of portfolio value per trade.

 

Strategy: Straight calls

 

BUY AMD 165 Calls DTE June 28th.  

 

Maximum cost/  maximum risk with no stop:  $8.95

Maximum gain:  Unlimited.  I will be trying to target  a 2:1  reward to risk ratio.

 

AMD has room to run along with the space as institutions pile back in:

// 5-28-24 Update

#OALERT #AMD #OENTRY $8.95

// 6-10-24 Update

#OEXIT #AMD $6.00 -36%
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