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Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

The Cherry Bomb
May 21, 2019

Huawei might have thought it had trouble with the US Feds, but when GOOGL gets in on the beatdown, the company knows it’s in for some real pain.  GOOGL is blocking Huawei from updates to the Android OS, among other things.  And that probably spooked the market more than any Trumpian tweet storm.  As Huawei is one of the semiconductor industry’s biggest customers, SMH, the semiconductor ETF, got crushed, too.  SMH is down the equivalent of 2.4 standard devs the past two weeks, and it’s outperformed the broader market to the downside.  That’s pushed its IV up, and its IV rank to 60%.  Yes, SMH could keep dropping, but a contrarian bull might see an opportunity.  If you are bullish on SMH, the jade lizard that’s short the 90 put and short the 109 call and long the 110 call in the June weekly expiration with 38 DTE is a bullish/neutral strategy that has no upside risk, a 79% prob of making 50% of its max profit before expiry, and that generates $3.66 of positive daily theta.
 

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Tom Sosnoff
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