Options Brief: Bulls Covet Calls on Semiconductor HOLDRs (SMH)

SMH – Semiconductor HOLDRs – Shares of the Semiconductor HOLDRS Trust, which issues depository receipts called Semiconductor HOLDRS that represent an undivided beneficial ownership in the U.S.-traded common stock of companies that develop, manufacture, and market semiconductors, fell 0.45% to touch down at an intraday low of $28.01 in morning trading. However, as the trading day progressed, shares of the fund clawed their way back up to rally 0.50% to $28.59 as of 11:35 am (ET). Bullish options strategists dominated trading activity observed on the fund thus far today. Investors expecting to see continued upward momentum in shares of the SMH purchased 1,200 calls at the July $29 strike for an average premium of $0.62 apiece. Call buyers at this strike price make money if the fund’s share price increases 3.60% to trade above the average breakeven point of $29.62. Meanwhile, other optimistic individuals picked up 1,300 calls at the higher July $30 strike for an average premium of $0.29 per contract. These higher-strike call coveters accumulate profits as long as shares of the Semiconductors HOLDRS Trust surge 5.95% over the current price of $28.59 to breach the effective breakeven point at $30.29 ahead of July expiration day.

About Andrew Wilkinson 1023 Articles

Affiliation: Interactive Brokers

Andrew Wilkinson is the senior market analyst at Interactive Brokers Group, where he provides daily commentary and analysis on U.S. equity options trading throughout the trading day. Andrew provides webinars designed to explain option-related trading scenarios covering futures, fixed income, forex and equities.

Interactive Brokers: Interactive Brokers offers direct market access to around 80 electronic global markets from a single account. Successful traders and investors understand that superior technology and lower trading costs can result in greater returns. For 32 years we have been building direct access trading technology that delivers real advantages to professionals worldwide. With consolidated equity capital of US $4.4 billion, IB and its affiliates exceed 1,000,000 trades per day. In addition, our prudent and conservative risk policies make Interactive Brokers a safe haven for your money. Discover some of the reasons why IB, the largest independent US broker/dealer, is the professional traders' and investors' choice.

Visit: Interactive Brokers

Be the first to comment

Leave a Reply

Your email address will not be published.