Our Marvell Technology (MRVL) Oct Week Two (10/14) 45 Put is deep in the money, so we will be accepting shares and selling calls next week to generate income.
When factoring in our net debit on the position, our cost basis is well above the current share price. My hope is that we can get back to breakeven faster through a combination of appreciation and income.
Chip stocks have been battered and bruised by concerns about an economic slowdown and lower demand, but MRVL remains a core stock.
Shares received an upgrade from a Wells Fargo (WFC) analyst this week, who called it one of the “best secular growth stories” in the market. I agree. The analyst upgraded MRVL to “overweight” from “equal-weight,” saying that pessimism has been priced into shares and that the company should hold up better than some of its peers amid an economic downturn.
We’ve been in the current position for a frustratingly long time, but the underlying fundamentals of the company are sound and shares are incredibly undervalued. Additionally, premiums remain high, allowing us to generate attractive cash rates of return every week or two.
Current Stock Price: $37.83
Net Debit: $17.59
Action: Accept shares
Cost Basis: $62.59
Potential Rate of Return: I am targeting breakeven for this position