The market sell-off this week and over the past month has been particularly unkind to the semiconductor sector. Fears of still-hot inflation and further aggressive rate hikes by the Federal Reserve have hit stocks like Advanced Micro Devices (AMD) and Taiwan Semiconductor Manufacturing (TSM) hard.
As you know, I am bullish on the chip sector long term and believe these names are grossly undervalued. Therefore, we will continue with our recovery trades by rolling the short legs of our LEAP call spreads out two weeks to generate more income and reduce our cost basis on the positions.
I plan to add protective puts to these spreads next week to hedge against a potential market sell-off following the Fed meeting.
3 AMD Jan 2023 (1/20/23) 70/Sep Monthly (9/16) 82.50 Call Spreads
Note: No action is needed on the AMD Jan 2023 (1/20/23) 70 Calls at this time.
Current Stock Price: $75.73
Cost Basis: $108.70
Action:
- Buy to close 3 AMD Sep Monthly (9/16) 82.50 Calls for around $0.04 each ($0.12 total)
- Sell to open 3 AMD Sep Week Five (9/30) 82 Calls for around $1.03 each ($3.09 total)
- Set initial credit limit at $0.99 ($2.97 total), but adjust as needed to roll today
New Cost Basis: $105.73
4 TSM Jan 2023 (1/20/23) 70/Sep Monthly (9/16) 82 Call Spreads
Note: No action is needed on the TSM Jan 2023 (1/20/23) 70 Calls at this time.
Current Stock Price: $77.99
Cost Basis: $113.35
Action:
- Buy to close 4 TSM Sep Monthly (9/16) 82 Calls for around $0.04 each ($0.16 total)
- Sell to open 4 TSM Sep Week Five (9/30) 81 Call for around $1.03 each ($4.12 total)
- Set initial credit limit at $0.99 ($3.96 total), but adjust as needed to roll today
New Cost Basis: $109.39