Welcome to Extreme Investor Network, where we provide unique insights and expert advice on all things investing. Today, we’re taking a closer look at the current state of the semiconductor market and how you can hedge your exposure to this volatile sector.
Despite recent fluctuations in earnings reports, chips are still a hot commodity in 2024. Investor sentiment is overwhelmingly bullish, with many predicting that semiconductors will continue to rally into the end of the year. However, as a former CBOT pit trader, I believe it’s important to exercise caution and consider hedging your semiconductor exposure.
One way to hedge your bets is by using put options in the VanEck Semiconductor ETF (SMH) to mitigate downside risk. With companies like Nvidia hitting new all-time highs and ASML issuing warnings about a longer-than-expected market recovery, it’s crucial to protect your investments.
As we approach Nvidia’s earnings on 11/21, now is the time to consider your options. While I’m not advocating for a complete exit from AI exposure, it may be wise to synthetically book profits and protect against potential downsides.
In terms of technical analysis, it’s important to pay attention to the 50-day moving average and anticipate potential retests. To put this strategy into action, consider a put spread like the one outlined below:
– Bought the SMH regular expiration Nov. 15 $245 Put for $7.00
– Sold the SMH regular expiration Nov. 15 $225 Put for $2.50
This debit spread will cost you $4.50 per one lot spread, but could yield a potential profit of $15.50 per one lot if the market moves in your favor.
Keep in mind that all investing involves risk, and it’s important to consider your own unique circumstances before making any financial decisions. If you’re unsure about how to proceed, consult with a financial or investment advisor to ensure you’re making the best choices for your portfolio.
At Extreme Investor Network, we’re dedicated to helping you navigate the complex world of investing. Stay tuned for more expert insights and actionable tips to help you make the most of your investments.