Call Spread on CRUS on 9/13/2012

Cirrus Logic's approach to computing is hardly wispy. The fabless semiconductor company, long a leader in audio chips of all kinds, develops integrated circuits (ICs) for specialized applications in consumer electronics, energy, and industrial equipment. Its more than 700 products include audio encoder/decoders (codecs), digital amplifiers, digital audio converters, and energy management devices. Under the Apex Precision Power brand, Cirrus provides ICs, board-level modules, and hybrids for high-power amplifiers. The company gets about 83% of its sales outside the US, primarily from customers in China and other Asian countries.

Stockwinners.com is bullish on this name for the following reasons: 

1. Cirrus Logic is behind the audio codec chip in the I-phone 5 and the increased sales of i-phone 5 will help this name move higher from these levels.
2. There is unusual call buying on this name. 140% above its normal average which implies the bullish sentiment and the momentum on this name.

Trade: Buy 1 Oct 42/45 Call spread for less than 1.15

• Buy 1 Oct 42 call for 2.85
• Sell 1 Oct 45 call for 1.75

Breakeven & Profit/Loss Analysis 

• Breakeven at 43.15 by October expiration 
• Profit up to 1.85 from 43.15 to 45, max profit of 1.85 above 45
• Lose up to 1.15 between 42 and 43.15, max loss of 1.15 below 42

The payoff table is presented below:

Trade Buy 1 October $42.00 Call at $2.85 Sell 1 October $45.00 Call at $1.70 For a net debit of $1.15 Profit/Loss Analysis Breakeven at $43.15 Maximum profit is $185.00 at strike of $45.00 Maximum loss is ($115.00) at strike of $42.00 Closing Summary Sold 1 October $42.00 Call at $0.00 Bought 1 October $45.00 Call at $0.00

Position closed on 10/21/2012 at price of $0.00 with a -100.00% loss in 37 days.

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