Dear Reader,

On Friday, we looked at a Daily Price Chart of Comcast Corp. noting the stock’s 50-Day EMA was trading below the 100-Day EMA signaling a ‘Sell’.

For today’s Trade of the Day we will be looking at a Daily Price chart for Advanced Micro Devices, Inc. stock symbol: AMD.

Before breaking down AMD’s daily price chart let’s first review which products and services are offered by the company.

Advanced Micro Devices, Inc. operates as a semiconductor company worldwide. The company operates in two segments, Computing and Graphics; and Enterprise, Embedded and Semi-Custom. Its products include x86 microprocessors as an accelerated processing unit, chipsets, discrete and integrated graphics processing units, data center and professional GPUs, and development services; and server and embedded processors, and semi-custom System-on-Chip products, development services, and technology for game consoles. 

Now, let’s begin to break down the Daily Price chart for AMD. Below is a Daily Price Chart with the price line displayed by an OHLC bar.

Sell AMD Stock

The Daily Price chart above shows that AMD stock has been hitting new 52-Week Lows regularly since mid-September.

Simply put, a stock does not just continually hit a series of new 52-Week Lows unless it is in a very strong bearish trend.

The Hughes Optioneering team looks for stocks that are making a series of 52-Week Lows as this is a good indicator that the stock is in a powerful downtrend.

You see, after a stock makes a series of two or more 52-Week Lows, the stock typically continues its price downtrend and bearish positions should be initiated.

Our initial price target for AMD stock is 51.50 per share.

Profit if AMD is Down, Up, or Flat

Now, since AMD shares have been making a series of new 52-Week Lows, the stock will likely continue its trend downward. Let’s use the Hughes Optioneering calculator to look at the potential returns for an AMD put option spread.

The Put Option Spread Calculator will calculate the profit/loss potential for a put option spread based on the price change of the underlying stock/ETF at option expiration in this example from a 7.5% decrease to a 7.5% increase in AMD stock at option expiration.

The goal of this example is to demonstrate the ‘built in’ profit potential for option spreads and the ability of spreads to profit if the underlying stock is down, up, or flat at option expiration. Out of fairness to our paid option service subscribers we don’t list the option strike prices used in the profit/loss calculation.

The prices and returns represented below were calculated based on the current stock and option pricing for AMD on 10/14/2022 before commissions.

Built in Profit Potential

For this option spread, the calculator analysis below reveals the cost of the spread is $303 (circled). The maximum risk for an option spread is the cost of the spread.

The analysis reveals that if AMD stock is flat or down at all at expiration the spread will realize a 65.0% return (circled). 

And if AMD stock increases 7.5% at option expiration, the option spread would make a 60.5% return (circled). 

Due to option pricing characteristics, this option spread has a ‘built in’ 65.0% profit potential when the trade was identified*.

Option spread trades can result in a higher percentage of winning trades compared to a directional option trade if you can profit when the underlying stock/ETF is up, down or flat.

A higher percentage of winning trades can give you the discipline needed to become a successful trader.

The Hughes Optioneering Team is here to help you identify profit opportunities just like this one.

Interested in accessing the Optioneering Calculators? Join one of Chuck’s Trading Services for unlimited access! The Optioneering Team has option calculators for six different option strategies that allow you to calculate the profit potential for an option trade before you take the trade.

Trade High Priced Stocks for $350 With Less Risk

One of the big advantages to trading option spreads is that spreads allow you to trade high price stocks like Amazon, Google, Netflix or Apple for as little as $350. With an option spread you can control 100 shares of Netflix for $350. If you were to purchase 100 shares of Netflix at current prices it would cost about $23,000. With the stock purchase you are risking $23,000 but with a Netflix option spread that costs $350 your maximum risk is $350 so your dollar risk is lower with option spreads compared to stock purchases.

Get Trade Insights Directly From Chuck

You can start getting market insights directly from 10-Time Trading Champion Chuck Hughes.

See what he’s trading and when with his exclusive Inner Circle Trading Service where he will send you his hand-picked stock and option trades.

Just call Brad at 1-866-661-5664 or 1-310-647-5664 to join or CLICK HERE to schedule a call! 

Wishing You the Best in Investing Success,

Chuck Hughes

Editor, Trade of the Day

Have any questions? Email us at dailytrade@chuckstod.com

*Trading incurs risk and some people lose money trading.