I’m kicking off the week talking about the chip shortage crisis — again.
Sorry, but I think it is very important.
You see, chip manufacturing is a very particular undertaking.
Suppliers can’t just find any old warehouse or factory and start spitting these things out.
The chips are made in special facilities called semiconductor fabrication plants — or fabs
These fabs can cost billions of dollars and take up to two years to build.
The environment where chips are actually created is known as a “clean room” and cannot have any dust particles or vibration …
The temperature and humidity also need to be controlled to reduce static electricity.
A clean room at NASA
Everyone from car and gaming component manufacturers to cryptocurrency blockchain producers are in need of chips …
The end demand for these things is nowhere in sight!
On My Radar
I’m adding the following stocks to my radar, as these companies make pieces of expensive equipment — ranging from $700,000 to $4 million — used in fabs.
– Lam Research (Ticker: LRCX)
– Advantest Corp (Ticker: ATEYY)
– ASML (Ticker: ASML)
– Teradyne (Ticker: TER)
A New Trade Idea
I see a doji in Applied Micro Devices (Ticker: AMD).
I know … I lost money on my last trade idea in AMD.
But, I got out in time to be able to re-enter with a new trade idea.
Remember, you always want to be able to trade again the next day — so stick to your trading plan.
If AMD opens today higher than $78.52, which is Friday’s close, I am going to buy a call vertical spread.
Looking at the options, I would like it to be a nearer term expiration, so that I am not paying any extra premium.
I like the Mar19 79/86 call spread paying $1.90-$1.95.
I am buying the 79 calls with an implied volatility of 42.99 and selling the 86 calls with a 44.69 implied volatility.
Like I said, I will only be executing this spread if AMD is opening and trading higher than Friday’s close.
I will take my losses if the spread trades down to $1.20.
I think this spread has great potential on the upside as AMD just traded $86 on March 2, four trading days ago.
Shoppers, also check out the doji in TER. Follow the same guidelines and there could be a great opportunity there, as well.
Have a great week!
Thanks for Reading … See You Next Tuesday!