All things considered the equities market held up fairly well during
yesterday's downfall for options trading investors. The bulk of the
liquidation was isolated to the commodities market as the sellers continued to
pummel the iShares Silver Trust (NYSE: SLV ) and even took the US Oil Fund ETF
(NYSE: USO ) down over 9%. Amidst this sea of red the semiconductor sector stood
out as one of the only areas finishing in the green for the day. Ever since
Intel (NASDAQ: INTC ) reported earnings on April 20, the semiconductor space has
been a bullish force boosting the overall performance of the market. With the
flurry of buying activity the Semiconductor HOLDRS ETF (NYSE: SMH ) is on the
brink of breaking out to three-year highs. To exploit a continued rise in this
space consider the purchase of a SMH June 36 38 Call Spread . That is buy the
June 36 Calls and sell the June 38 Calls. With a current price around $1.00 this
vertical spread offers a cheap way to gain bullish exposure on the
semiconductors over the next month. Consider the trade stats below: Max Risk:
$100 Max Reward: $100 Expiration Breakeven: $37 Rather than riding the trade
all the way to expiration in an attempt to realize the entire $100 profit,
traders should consider closing the position after capturing the majority of the
profit such as 70% or $70. (Source: MachTrader) At the time of this writing
Tyler Craig had no positions on SMH. Follow Tyler Craig on Twitter@TylersTrading
.
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