DailyPlay – Opening Trade (TXN) – September 5, 2023

TXN Bearish Opening Trade Signal

View TXN Trade

Strategy Details

Strategy: Short Call Vertical Spread

Direction: Bearish

Details: Sell to Open 3 Contracts Oct 13th $170/$180 Call Vertical Spreads @ $3.96 Credit per contract.

Total Risk: This trade has a max risk of $1,821 (3 Contracts x $607) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $607 to select the # shares for your portfolio.

Trend Continuation Signal: This stock is neutral to bearish and expected to break lower.

1M/6M Trends: Neutral/Bearish

Technical Score: 5/10

OptionsPlay Score: 103

Stop Loss: @ $8.00 Debit (100% loss).

Entering the Trade

Use the following details to enter the trade on your trading platform. Please note that whenever there is a multi-leg option strategy, it should be entered as a single trade. 

Please note that these prices are based on Friday’s closing prices. Should the underlying move significantly during the pre-market hours, we will likely adjust the strikes and prices to reflect a more accurate trade entry. 

Investment Rationale

As semiconductors lose relative ground to the S&P 500 over the past few weeks, non-specialized fabricators such as Texas Instruments are pressured more as demand slows globally. TXN is expected to earn nearly 21% less than last year, yet continues to trade at 22x forward earnings. Additionally, semiconductors for autos remain one of the few categories where demand remains resilient, yet TXN is showing signs of losing market share to its peers ADI and NXPI. With the stock failing to break out from its $165-170 trading range alongside the rest of the market, I expect TXN to trade sideways to lower from here and warrants selling a Call Spread to potentially take advantage of this outlook. Sell Oct 13 $170/$180 Call Vertical @ $3.96 Credit. With a hypothetical portfolio of $100,000, I recommend risking 2% of the portfolio’s value on this trade, which is 3 Contracts for a risk of $1,812. We will set a stop loss on the spread at 100% of the premium collected, $8.00 Debit.

TXN – Daily