Use Options to Profit From a Texas Instruments Rally
Here's a low-risk strategy to profit from a stock that may have bottomed out.

The recent market movement has seemed like a volatile game of rapid-fire ping pong between the bulls and bears.  While the bears appear to be maintaining the upper hand in most stocks, the bulls have been stealthily showing their prowess in a small, but increasing stable of names. 

Take the tech sector for instance.  Though it hasn’t outperformed by leaps and bounds, it has exhibited minor relative strength over the past week.  One such tech stock beginning to show potential bottoming signs is semiconductor maker Texas Instruments (NYSE:TXN). 

In addition to the chart formation, yet another promising sign for the Dallas-based company is the bullish reaction it had to a recent news release lowering its earnings and revenue expectations for third quarter.  Rallying on poor news is a tell-tale sign the stock may have already dropped a sufficient amount over the past few months to price in whatever slowdown looms on the horizon. 

If TXN wants to go higher, bullish plays make sense on a breakout above $26.50.  One strategy worth consideration is the October 26-28 bull call spread.  To enter the position, traders buy to open the Oct 26 call while selling to open the Oct 28 call.  Currently, the spread cost around $1.  The maximum risk is limited to the initial $100 debit paid while the maximum reward is capped at $100.

Source:  MachTrader

At the time of this writing Tyler Craig had no positions on TXN.

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