Qualcomm: The Virtue of Patience

There’s an old expression in the U.S. Army: soldiers are often forced to “hurry up and wait.”

That’s what it’s like much of the time for those trading the loophole trade, or spread trades (debit or credit).  You put on the spread trade and to realize maximum profit or get paid your money on this trade, you have to wait until expiration of the option contracts.

That’s what we’re now facing with our Qualcomm, Inc. (NASDAQ:QCOM) trade – and I want you to make money from this situation.

First watch my video, which shows you exactly what to do. I also flesh out this advice, in the body of this issue below.


How to Maximize Your Potential in Qualcomm

On July 8, the Qualcomm trade was a Debit Spread using puts.  Specifically, it was a July15 67.50/70 P spread.  This was a Money Calendar Sell candidate, as you can see:

The 10-year look at QCOM’s price moves from start to end date show an average profit move down of $1.99; the last three years have averaged around a $2.50 drop in price.

Most of the time, the concern for some traders undertaking this type of trade, a spread trade, is to wait until expiration to get the chance at full profitability.  In this case, the trade day’s length is 30.  For some, waiting a whole month to get paid causes impatience and frustration.  Not being able to get the full profit right away bugs them.

If you’re an impatient trader and you’ll start squirming in your seat if you can’t close the trade for maximum profitability within a week, this strategy of trading spreads might not be for you.

But for those of you perfectly content with letting the trade run its course for a month, and waiting the necessary time for the profits to potentially roll in and give you a shot at +61%, then you will like the more patient trading approach.

Here is the Qualcomm trade, as shown by these charts:

Fast forward to the close of Wednesday, July 8:

Here are considerations that would cause some traders to close the position early:

  1. You need to come up with money for another trade and closing this trade gets you that money;
  2. A margin call; or
  3. You find yourself getting antsy and simply want to close that trade without letting it fully play out.

Here is the trade situation as of the close of markets Wednesday, July 8:

I often get asked if we should take a trade off early. In situations like this on my spreads, where giving it a bit more time could bring in more profitability, I will exert patience and wait.  I look at where the stock is to the sold strike and gauge if I’m safe that it won’t touch that price.  In the case of QCOM, the data tell me that it will stay below the $67.50 price, at least until expiration.

Right now, if you must close this trade, the natural pricing shows a +32% ROI.  Not bad, but for me I will “hurry up and wait” another week to go after that full profit potential of +61% ROI.

For a detailed explanation of everything you’ve just read, watch the video embedded with this issue of Power Profit Trades, which drills down and explains what to do – and what not to do – in explicit and easy-to-understand detail.

Until next time…

Tom Gentile
America’s #1 Trader

7 Responses to “Qualcomm: The Virtue of Patience”

  1. I find your research and methods very informative but unfortunately my finances have been the major issues therefore have not yet been able to execute and move forward.Keep the good work up.

  2. In this Qualcomm loophole trade, when the price of the stock dropped into the low $60s, wouldn’t you be forced to buy 100 shares of the stock and spend a little over $6,000 to do it since you sold puts? Wouldn’t that completely destroy the option spread profit or will you be able to sell the shares at $70 because of the $70 put that was bought thus earning a profit on the stock and the options? How do you make sure your purchased shares are bought as opposed to shares borrowed from someone else’s account?

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