Silicon Laboratories (NASDAQ:SLAB) designs and develops analog-intensive, mixed-signal integrated circuits for use in a variety of electronic products in a broad range of applications, including mobile handsets, personal computer modems, satellite set-top boxes, automotive controls and sensors, personal video recorders, industrial monitoring and control, central office telephone equipment and optical networking equipment. The company groups its products into two categories: mobile handset products and broad-based, mixed-signal products.
A number of new readers have asked for additional spread candidates to help them get started with the MCM Portfolio. While the market has not offered much in the way of outstanding positions, we have uncovered a few stocks that warrant consideration based on their current technical character. SLAB is one of those issues and a brief study of its recent price history reflects a range-bound pattern that has lasted for nearly seven months. Will this trend continue? Obviously, no one can say with complete certainty but a spread involving (OTM) call options in April appears to offer reasonable risk versus reward for conservative traders.
PLAY (less conservative - bearish/credit spread):
BUY CALL APR-45.00 QFJ-DI OI=330 ASK=$0.20
SELL CALL APR-40.00 QFJ-DH OI=947 BID=$0.65
INITIAL "NET-CREDIT" TARGET = $0.50-$0.55
POTENTIAL PROFIT (X 5 contracts) = $250
RETURN ON INVESTMENT (max) = 11%
COST BASIS = $40.50
LOSS-LIMIT/EXIT POINT = $37.50 (cons) - $39.75 (aggr)