Hi Benny. Sorry for the error in the text, I am recommending the $85 call option. However, if you can pick up the $80 option for a decent price, then that would be a safer way to play it.

Please ignore – wrong trade.

Hi Benny. I believe WDC will be a very tradable stock over the next six months, so you may be able to repeat your success with it more than once. Good work!

Thanks for the update. I was feeling conservative and went w/ Jan 19 $80. Wishing I’d done your recommended trade but cannot complain when I’m looking at a 50% gain in ~2 weeks.

It was really hard to convince myself to stay in on this one. Let me know if you change your mind about cashing in.

Hi Dave. You should be able to place a Sell Stop Order on that option with your broker that will be executed if/when the option drops to whatever value/limit you specify: http://www.call-options.com/stop-orders-to-sell-options.html.

I think so, and the trade is still open provided it is below the buy limit and has not been closed out yet. WDC is currently valued at less than six times forward earnings, which is either absurdly low or indicative of an impending implosion of demand for cloud storage which seems far-fetched to me.

We’ll find out in a week when the company releases its next set of quarterly results next Thursday (https://finance.yahoo.com/news/western-digital-sets-july-26-150000271.html) because the valuation doesn’t make much sense at the moment. WDC is currently priced at 1.1 times sales and less than 6 times forward earnings, both of which are too low unless there is something we don’t know about it yet. There is enormous implied volatility in the options expiring next Friday, so it looks like a lot of people are betting on a big move one way or the other after those results come out.

Hi Jim, Thanks for the update.
Agree very confusing on why stocks plunged that much today. Hope it bounce back.

Thanks for the update. I went for the aggressive double down with Jan $75 calls.

The company announced a new $5 billion share repurchase plan, so presumably that isn’t the problem, either. Even though WDC is now priced at just 6 times forward earnings, it’s trailing PER of 103 could be a problem since many algorithmic trading programs would view that number has excessively high. If that is the case then WDC should rally once the trailing PE number starts to come down later in the year.

Yes, the trailing PER is a known number since it is based on the sum of reported earnings over the previous four quarters. As for the option expiring in October, obviously at this point it seems unlikely that WDC will get back above $85 within three months given where it opened this morning ($69). However, I believe it could get back in the $75 – 80 range by then, so it might make sense to roll this trade down to a lower strike price between now and then.

Do you think the announced dividend of .50 is having a negative effect on the stock?

Although demand for HDDs (hard disk drives) is on the wane, Western Digital now derives only half its revenue from that segment so its hard to believe that alone explains the 30%+ share price drop since it peaked above $106 five months ago. Unless there is something else about the company we don’t know yet, I believe it is one of the most oversold stocks in the S&P 500 Index. From a technical perspective, WDC is near its lower Bollinger Band and has an RIS of 22 which suggests it is close to bottoming out.

https://www.investingdaily.com/systematic-wealth/articles/43208/taking-a-leap-of-faith-on-western-digital/

Yes, I do. WDC is scheduled to release quarterly results this Thursday, so we may see some positive movement in the stock then if forward guidance is better than expected (which is what I expect). Of course, if the overall stock market is tanking at the same time then it may be difficult to make much headway until that has run its course.