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Taking A Position In Harmonic

|Includes: Harmonic Inc. (HLIT)

Harmonic Inc. (NASDAQ:HLIT) has been a favorite for options trades over the years. The company has current assets well in excess of a 2:1 ratio, and trades somewhat below the $9 I think it's worth. I've written it up a total of three times, discussing valuation and seasonality. It tends to do well in Dec/Jan/Feb. It's optionable, and there is premium available to be earned by selling calls, more or less at the money.

With the stock at $7.60, I was able to leg into a diagonal spread, long July 2014 5 calls and short April 2014 7.5 calls for a net debit of $2.10.

The stock has a beta of 1.50, and implied volatility typically runs a little above 30%.

Long term, there isn't that much downside here, because of the strength of the balance sheet. I suspect the stock will hit $9 somewhere in the next few years, and in the meantime I'm happy to earn the premium on calls at 7.5. I've done versions of this trade on and off for years and always made money.

So with not that much to do today, and my speculative account having a lot of cash in it, I decided to go back to something that has worked in the past.

Disclosure: I am long HLIT.