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Trade of the Day: Lam Research (LRCX)

This stock should break out of its channel if the market rises


Lam Research (NASDAQ:LRCX) manufactures and sells semiconductor equipment and materials. The stock broke sharply above resistance in the $43 area last week before stalling somewhat this week. But it should continue moving higher if stocks do so also. Here is the best way to play more strength in Lam Research:

Buy the LRCX Jun 47 Call (LRCX130622C00047000) at a suggested price of $1.20 ($120 per contract).

After taking the position, enter a good-til-cancelled contingent order to sell this option if the stock hits its target price of $49. That should give you an option price of about $2.90, for a 141% profit.

Close this position and cut losses if the stock closes below $44.10, when the option price should be about 60 cents. The stock is currently trading at $45.65. The computer-simulated probability of this option hitting its target price is 15%.

This  short-term option can be opened for up to three days after the date of recommendation. Make sure the stock and option prices are close to where they were when we made the recommendation. If after three days you still have not gotten the position filled, cancel the order and wait for our new recommendations, as the profit probabilities may no longer be valid.

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