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Credit Spread – Cree Inc. (CREE)

I’m returning to this semiconductor and lighting stock as several analysts are upgrading their targets and the company is first to market with a new product.

Cree Inc. (CREE): Put Credit Spread

The trade: Sell the June 55/57.5 put credit spread (selling the June 57.5 put and buying the June 55 put) for 40 cents or better.

The strategy: The maximum potential profit for this trade is 40 cents if CREE is trading above $57.50 at June expiration. The maximum loss is $2.10 ($2.50 – 40 cents) if CREE is trading below $55 at June expiration.  Breakeven is $57.10 at expiration based on a credit of 40 cents.

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The rationale:
Cree manufactures lighting products, LED products and semiconductor products. It is a stock I have written about for a trade idea in the past. The company just recently introduced the industry’s first no-compromise ceramic mid-power LEDs. If you are like me, you probably have no idea what that exactly means, but being the first to introduce can’t be a bad thing. Just last month, a couple of analysts upgraded either their target prices on the stock or their stock rating.

Once again it’s nice to see that the company and stock has some potential nice fundamentals behind it, but this trade idea boils down to the technicals on the chart. The stock has been moving higher since January and it has been in a solid uptrend (setting higher pivot highs and higher pivot lows) since the beginning of April. Right now the stock has pulled back and has potentially set-up a bullish move which would trigger if the stock moves above previous highs. In addition, the stock has come down to a support area (upward trendline) where it has reversed several times before and proceeded to move higher. This support is well above the short put strike. This trade idea has two bullish technical set-ups that might just produce a worthless expiring put spread.


No positions held at the time of this writing. If you are interested in a free trial of my LIVE options trading room visit:

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