Trent Becomes Not-Bearish On Semis

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: author has a short position in SMH put options at time of publication.

Comments

[NutritionFacts:]

Keep your stuff coming William. I subscribe to your email feed and appreciate both the content and the effort you expend in generating it.

2007 Jun 07 05:36 PM

[William Trent1:]

Thanks J. I know I can't please all of the people all of the time, but if I add enough value for enough people it will be worthwhile. In a business where being right 60% of the time results in rock star status I realize I'm going to have duds too. We'll see how my timing works out on this trade.

2007 Jun 07 07:44 PM