Moore’s Law is an observation made by Intel (INTC) co-founder Gordon Moore about the number of transistors manufacturers are able to fit on a given area of a circuit board. He said the density of transistors would double every 24 months. This, subsequently, would reduce the size of electronics and increase memory.
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About four years ago, another Intel scientist, Paolo Gargini published a paper saying there was a fundamental limit to how small the silicon transistor could be. He expected at the current rate of technology progression, Moore’s Law would reach its limit around 2018.But the paper assumed all the circuit’s transistors lie on a 2D plane. It has long been theorized by scientists, transistors could be ‘stacked’ to utilize the third dimension. But, the technological hurdles were high and other technological prospects seemed brighter.
That was the case, until an announcement came this week of IBM’s development of a three dimensional chip. Transistors can now be stacked and Moore’s law appears to be in danger again. Ironically, this development may cause the rate of technological growth to exceed what Mr. Moore predicted in the mid 60’s.
This news was quietly mentioned on a low ranking article of the Wall Street Journal and other publications, but could have an enormous impact. Dave Lammers, director of research for WeSRCH.com, a Web site for semiconductor engineers based in Austin, Texas, said “This is a big step, this is a really historic move. This has been studied to death, but it’s the first time a company is saying, ‘We can connect two chips in the vertical direction.'”
The way IBM accomplished it was by etching tiny holes through the chip and then filling the holes with tungsten to make tiny vertical wires. This technology may appear in consumer electronics as early as next year.
This article serves as an example of how the average investor can identify the most attractive option trade based on their view of whether a stock will rise or fall. In this case, we will assume IBM’s stock will rise with the news. We will also assume IBM’s competitor’s stock will feel a boost from the news. This may be an erroneous assumption, but therein lies the beauty of the PowerOption’s website. If an investor’s view is bullish, they might choose to use bull call debit spreads or bull-put credit spreads to make money off their hunch. If an investor believes a stock will fall, they might choose bear put debit spreads or bear-call credit spreads. Today we will look at a covered call investment strategy. Click on any of the above links for more information about the specific strategy or take a look at our covered call example.
Potential Trades:
Below we take a look at IBM and a few companies in the memory chip (including Flash) sector. This broad view may help an investor identify other compelling trades in the sector. All of the following option trades have 37 days until expiration. These trades were discovered using the powerful suite of option search tools found at PowerOptions.
| PowerOptions covered call search Memory Chip Sector (37 days) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock Sym |
Stock Price |
OPTION | Strike Info |
Opt Bid |
% Dnsd. Prot. |
% If Unch. |
% If Asgnd |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| IBM | $95.67 | IBMER | 07 MAY $95.00 | $2.65 | 2.80% | 2.10% | 2.10% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| RMBS | $20.74 | BNQEX | 07 MAY $22.50 | $0.70 | 3.40% | 3.50% | 12.30% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SNDK | $43.40 | SWFEI | 07 MAY $45.00 | $1.70 | 3.90% | 4.10% | 7.90% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| NETL | $28.55 | LKTEF | 07 MAY $30.00 | $1.40 | 4.90% | 5.20% | 10.50% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
IBM – International Business Machines Incorporated. This trade involves the May $95 call option and offers 2.8% downside protection and 2.1% potential profit if the stock is above the $95.00 strike price at the end of the option period. The stock is currently trading at $95.67.
RMBS – Rambus, Inc. engages in the invention and license of chip interface technologies in California. This trade involves the May $22.50 call option and offers 3.4% downside protection and 12.3% potential profit if the stock is above the $22.50 strike price at the end of the option period. The stock is currently trading at $20.74.
SNDK – SanDisk Corporation designs, develops, manufactures, and markets flash storage card products used in various consumer electronics products. This trade involves the May $45.00 call option and offers 3.9% downside protection and 7.9% potential profit if the stock is above the $45.00 strike price at the end of the option period. The stock is currently trading at $43.40.
NETL -NetLogic Microsystems, Inc., a fabless semiconductor company, designs, develops, and markets knowledge-based processors for wireline and wireless networking systems. This trade involves the May $30.00 call option and offers 4.9% downside protection and 10.5% potential profit if the stock is above the $30.00 strike price at the end of the option period. The stock is currently trading at $28.55.
Competitors:
Competitors for IBM include: Electronic Data Systems Corp. (EDS), Hewlett-Packard Co. (HPQ), Microsoft Corp. (MSFT), Applied Biosystems Group (ABI), Accenture Ltd. Class A (ACN), BearingPoint Inc. (BE), BEA Systems Inc. (BEAS), BMC Software Inc. (BMC), Computer Associates Intl. Inc. (CA), Compuware Corp. (CPWR), Cray Inc. (CRAY), Dell Computer Corp. (DELL), Datalink Corp. (DTLK), Diamondcluster Intl. Inc. (DTPI), NIC Inc. (EGOV), EMC Corp. (EMC), Dot Hill Systems Corp. (HILL), Infocrossing Inc. (IFOX), Informatica Corp. (INFA), NCR Corp. (NCR), Novell Inc. (NOVL), Network Appliance Corp. (NTAP), Nuance Comms. (NUAN), Oracle Corp. (ORCL), Pacificnet Inc. (PACT), Quest Software Inc. (QSFT), Rackable Systems Inc. (RACK), SAP AG (SAP), Sapient Corp. (SAPE), Sun Microsystems Inc. (SUNW), Sybase Inc. (SY), TIBCO Software Inc. (TIBX), Unisys Corp. (UIS), Vignette Corp. (VIGN), WebMethods Inc. (WEBM), and WebEx Communications Inc. (WEBX).
Competitors for RMBs include: Micron Technology Inc. (MU), Qimonda AG (QI), and Samsung Electronics Co., Ltd. (private).
Competitors for SNDK include: Lexar Media, Inc. (private), Renesas Technology Corp. (private), and Samsung Electronics Co., Ltd. (private).
Competitors for NETL include: Integrated Device Technology Inc. (IDTI), LSI Corp (LSI), and Renesas Technology Corp. (private).
For more information about how to identify and research great option trades, visit the PowerOptions website. There you will find the data you need to make quick, clear, and informed decisions. You can trade knowing you have found the best investment. Also, PowerOptions will allow you, with a few quick clicks, to quickly and accurately compare trades. PowerOptions‘ premium customer support is second to none in the industry. They can be easily contacted when you need them at their toll-free number to answer customer questions. Call them now toll free at 877-992-7971.
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PowerOptions‘ sister company PowerOptionsApplied provides expert stock option trading recommendations. PowerOptionsApplied specializes in covered calls, naked puts and iron condor stock options strategy recommendations. PowerOptionsApplied provides a 30-day risk free trial of its service.
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