Update: SMH Aug Puts – Semi Truckin’

by CC June 29, 2017 2:50 pm • Trade Updates

A little over a month ago we took a look at one of the best performing sectors the past 2 years, semiconductors. We detailed a trade idea in the etf SMH to position for a pullback in semis, selling near term to buy puts out to August. Here it was, from May 23rd:

So what’s the Trade? 

SMH ($84.28) Buy June / August 80 Put Calendar for $1.25

-Sell to open 1 June 80 put at 40 cents

-Buy to open 1 August 80 put for 1.65

The June 80 puts expired worthless and now with the SMH lower (and the trade now simply the Aug 80 puts) the trade is worth about 2.50 or about a double. For those looking to book profits you can either do that here or wait to see if SMH tests 80 first.

But with the uptick in movement in the market the past few days you can also take off all the risk on the initial trade while playing for that follow through:

Update – SMH (81.50) Sell to open the Aug 75 puts at 1.25

Resulting Position – Long the SMH (81.50) Aug 80/75 put spread for even money

Breakeven on Aug expiration – Gains of up to $5, no possible losses.

Rationale – This trade does not book any of the existing profits but now plays for a continuation of the selling with no risk, looking out to August. If the semis were to bounce near term the new trade can be taken off for slightly less profit from the original trade.