LRCX Trade Idea: As Chip Stocks Pop, Here's How To Lock In $1,000 In Premium | IBD

TL;DR

Land Research (LRCX), a chip stock, is showing strength in a volatile market with converging moving averages, making it an appealing bullish trade opportunity.

Transcript

foreign it's Ali Coram and Harold Morris here with your option of the day we're in a volatile market right now but Harold we're seeing it chip stocks Flex their strength including land research so we're going to take a look at that for our trade idea today so tell us why the thesis of this trade uh why you have a bullish bent here on lrcx well just... Read More

Key Insights

• 🐿️ Chip stocks, particularly Land Research (LRCX), are performing well in a volatile market.
• 💪 Converging moving averages serve as strong support levels for LRCX.
• 😜 The semiconductor equipment group, to which LRCX belongs, is highly ranked by IBD.
• 🚄 A bull put spread strategy can be employed to manage risk while maintaining a bullish trade.
• 🥳 An expiration date around 45 to 60 days out provides sufficient time for the trade to work.
• 🚄 Strike selection for the bull put spread should involve considering the Delta and desired downside protection.
• 📞 The probability of success for the trade can be calculated by comparing the credit received and the width of the spread.

Questions & Answers

Q: Why is Land Research (LRCX) an attractive bullish trade in the current market?

LRCX is a chip stock that benefits from the strength of the technology sector. Its moving averages are converging, indicating a strong support level to minimize risk.

Q: What strategy can be used to manage risk while making a bullish trade on LRCX?

A bull put spread is a recommended strategy to protect the downside while maintaining a bullish stance on the stock.

Q: How far out should the expiration date be for the trade on LRCX?

It is advisable to choose an expiration date around 45 to 60 days out, allowing enough time for the trade to play out successfully.

Q: How do you determine the strikes to utilize for the bull put spread on LRCX?

Start by looking at the Delta, aiming for around 30. In this case, selling the 475 strike and buying the 470 strike provides downside protection.

Summary & Key Takeaways

• Chip stocks, including Land Research (LRCX), are performing well in the market.

• LRCX has broken above strong support levels and is bouncing off its moving averages.

• The semiconductor equipment group, to which LRCX belongs, is highly ranked by IBD.