Can VMware Lead the Tech Comeback?

The first batch of American sanctions on Iran has come into effect, 90 days after the U.S. withdrew from the nuclear deal. The new measures bar the sale of U.S. currency to Iran’s government sanction trade in precious metals and industrial materials, outlaw the purchase of Iran’s sovereign debt, and restrict the country’s auto and aerospace sector. Unless Iran complies with the U.S. demands, far-tougher steps will take effect on Nov. 5, when the U.S. will cut off Iran’s oil exports and impose sanctions on shipping.

Let’s consider VMware, Inc. (ticker: VMW):

The VantagePoint platform recently indicated upside momentum.

Using the predictive indicators embedded within the VantagePoint platform and its predictive AI technology, we will point out three significant things. We have a bullish crossover indicated by the blue predictive indicator line crossing above the black simple moving average on August 2nd.  We can combine that with the VantagePoint propriety neural index indicator moving from the RED to the GREEN two days before.  This indicator measures strength and weakness for a 48-hour period, in this case strength.  The move to the GREEN position further makes the case for a potential bullish scenario. We also have the predicted high and low above yesterday’s actual high and low indicating further strength.  I want to play the VP bullish indication.

Strategy Discussion

For active traders with a shorter investment time horizon, you can consider a setup utilizing options. Given the market conditions outlined above, taking an active, premium debit approach may be the best path to success.

Because of the reasons given above, the purchase of a debit call spread may be one way to approach this situation.  You will first want to calculate your target strike.  In order to do this, you will need three pieces of data:  current price, expiration date and the implied volatility associated with that expiration date.  For VMW, that yields a target strike of ~$158.00.  You may want to consider the VMW August 17th regular expiration 155/157.5 call spread, buying it for $0.70.  The most you can lose is the premium paid and the most you can gain is the width of the spread less any premium paid.  Max risk = $0.70 and max reward = $1.80.  This means that you are getting odds of 2.57:1.

Given the trading and market environment outlined above, a trader must evaluate whether this reward/risk ratio is appropriate for his/her risk tolerance.