This Small Company Could Be Set To Become a 5G Giant
Some 5G news could set up a trade for smaller investors. Business Wire reported,
Keysight Technologies, Inc. (NYSE: KEYS), a leading technology company that helps enterprises, service providers and governments accelerate innovation to connect and secure the world, announced that the company’s 5G network emulation solutions were used by Qualcomm Technologies, Inc., a subsidiary of Qualcomm Incorporated, to successfully demonstrate the industry’s first 5G laptop with integrated modem at Computex, a leading global ICT and IoT show in Taipei, Taiwan last month.
The demonstration showcased always connected workflows, all-day battery life and Windows 10 support using Qualcomm’s latest platform, the Qualcomm Snapdragon™ 8cx system-on-a-chip (SoC) and X55 5G modem, as well as Keysight’s 5G network emulation solutions.
This demonstration displayed high-speed, low-latency connectivity made possible by 5G new radio (NR), offering transformative PC user experiences for both consumers and the enterprise with downstream speeds of up to 7Gbps.
“We are pleased to again support Qualcomm, and their connected ecosystem of wireless device makers, to deliver 5G applications for consumers and vertical industries,” stated Lucas Hansen, senior director of Keysight’s wireless test group.
“Keysight’s 5G solutions are rapidly becoming the industry standard across the mobile ecosystem, enabling mobile and device manufacturers to validate multi-mode designs and offer these exciting new products to consumers.”
Keysight’s 5G network emulation solutions – based on Keysight’s UXM 5G Wireless Test Platform – enable device makers to validate 5G NR multi-mode designs across protocol, radio frequency (RF) and radio resource management (RRM) in both non-standalone (NSA) and stand-alone (SA) modes. Keysight’s end-to-end 5G solutions provide the flexibility needed to rapidly validate multi-mode designs in nearly any form factor, accelerating their ability to address global requirements in sub-6GHz (FR1) and mmWave (FR2) spectrum.
Earlier this year, the two companies announced they had established the mobile industry’s first announced 5G NR data call in the Frequency Division Duplexing (FDD) mode, as well as demonstrated an industrial internet of things (IIoT) application at CES 2019.
KEYS could be set up to challenge recent highs.
A Trade for Short Term Bulls
As with the ownership of any stock, buying KEYS could require a significant amount of capital and exposes the investor to standard risks of owning a stock.
To reduce the risks of a trade, an investor could purchase a call option. This allows them to benefit from upside moves in the stock while limiting risk to the amount paid for the options. However, buying a call option can also require a significant amount of capital and includes the risk of a 100% loss.
Whenever an option is bought, the maximum risk is always equal to 100% of the amount of spent to purchase the option. Since options cost significantly less than a stock, the risk in dollar terms will usually be relatively small to own an option.
To further limit the risks of the trade, an investor could use a bull call spread. This strategy consists of buying one call option and selling another at a higher strike price to help pay for the cost of buying the first call. The spread strategy always reduces the risk of an options trade.
This strategy is designed to profit from a gain in the underlying stock’s price but has the benefit of avoiding the large up-front capital outlay and downside risk of outright stock ownership. The potential risks and rewards of this strategy are summarized in the chart below.
Source: The Options Industry Council
Both the potential profit and loss for the bull call spread are limited. The maximum loss is equal to the net premium paid when the trade is opened. The maximum profit is limited to the difference between the strike prices, less the debit paid to put on the position.
This strategy could be especially appealing with high priced stocks where the share price and options premiums are often a significant commitment of capital for smaller investors.
A Specific Trade for KEYS
Every day, we scan the markets looking for trades with low risk and high potential rewards. These trades are available almost every day and we share them with you as we find them. Now, it’s important to remember these are trading opportunities in volatile stocks.
When we find a potential opportunity, we evaluate it with real market data. But because the trades are volatile, the opportunities may differ by the time you read this. To help you evaluate the current opportunity, we show our math and explain the strategy.
For KEYS, the July 19 options allow a trader to gain exposure to the stock.
A July 19 $92.50 call option can be bought for about $1 and the July 19 $95 call could be sold for about $0.58. This trade would cost $0.42 to open, or $42 since each contract covers 100 shares of stock.
The amount paid to enter the trade is the largest possible loss on the trade. This is generally true whenever a trader is creating a debit to enter an options trade. “Creating a debit” means there is a cost to enter the trade. You could create a debit by simply buying puts or calls to open a directional trade.
In this trade, the maximum loss would be equal to the amount spent to open the trade, or $42.
The maximum gain on the trade is equal to the difference in exercise prices less the amount of the premium paid to open the trade.
For this trade in V the maximum gain is $2.08 ($95 – $92.50= $2.50; $2.50 – $0.42 = $2.08). This represents $208 per contract since each contract covers 100 shares.
Most brokers will require minimum trading capital equal to the risk on the trade, or $42 to open this trade.
That is a potential gain of about 395% based on the amount risked in the trade. The trade could be closed early if the maximum gain is realized before the options expire.