How To Play The Battered Tech Stocks
Like you, we have been watching the tech stocks get beaten up over the past
several months. But there are some ways to play these battered
stocks. The answer is to look long term. Don’t look for a one-month
or three-month turn around. But if you look longer term, let’s say over
the next year, some interesting risk/reward relationships pop up. Here are
four situations that we are currently looking at:
| Stock | Current
Stock Price |
Last 6 Mos. Stock Price |
Trade Idea |
|
| CSCO | 23 | 22-68 | Buy 5 Jan 25 Puts Sell 5 Jan 35 Puts |
7 Credit |
| DELL | 22 | 16-42 | Buy 5 Jan 25 Puts Sell 5 Jan 35 Puts |
7 3/8 Credit |
| JDSU | 27 | 25-122 | Buy 5 Jan 30 Puts Sell 5 Jan 40 Puts |
7 Credit |
| SEBL | 36 | 36-119 | Buy 5 Jan 40 Puts Sell 5 Jan 50 Puts |
6 3/4 Credit |
The strategy that we are
considering is a Put Bull Spread. If you sell the spread for $7, your
total risk is $3 (at expiration only). Your reward is $7 if the stock is at or over the short strike at expiration.