I've opened a January bull put spread (p27.5/-p29) on SMH, the etf that tracks semiconductor stocks, with the stock trading at 27.56 for a 0.93 credit.
The trade is profitable at expiration from about 28.07 upward, and fully profitable at 29.05.
The average true range over the past 14 days is 0.52, so profitability is about one up-days trading away, and maximum profit is about 3 up-days trading.
From the chart, it's a blue-sky stock. There's no resistance on the upside.
There is support at 27.4, and support at 26.9. The 3% stop/loss is 26.74.
A stop/loss at triple the average trading range would be 26, or a 6% decline. That level also shows price support.
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