RFMD August 25 Puts
I also bought a batch of those puts today. Yeah RFMD is strong. But what is strong one day is weak the next. This market has been selling strength aggressively lately. Look at the wireless sector and the $XTC(telecom index) notice how the index is up against stiff resistance and is overbought at a time when the P/C ratio just closed under .5 and the overall Nasdaq may sell off again. Also, lots of key wireless stocks are overbought and also rising into very heavy resistance zones. Here they are so you can look at the daily charts: VOD, NOK, TXN, MOT, RFMD, VZ, BTY, QCOM, TQNT. T, NXTL, ERICY, CNXT.
Also, the premium on those puts dropped bigtime when the stock "appeared" to break 27 resistance to the crowd. When the perception is it broke out successfully, the market makers will drop the premiums anticipating people trying to dump the puts. I see RFMD with vulnerable gaps and a bearish rising wedge formation and would be very surprised to see it break 31 short-term. A lot of rising wedge breakouts have a tendency to fail, especially in this market, where even the best looking breakouts fail.
I believe every so often if the risk-reward is large enough, buying puts is better than shorting. ()% of puts expire worthless, but the remaining 10% can make one a heck of a lot of money if you can narrow it down to that. |
