ASML, the sole EUV lithography maker, is raising prices 10% for Samsung and SK Hynix from January, lifting near-term revenue and speeding upgrades; one view expects a beat and raise, with Q4 guidance critical, while another is more negative given the stock is up nearly 60% this year.

Moving on to the technology sector, ASML is scheduled to begin its sector earnings announcements on Wednesday. Wall Street expects earnings to nearly double from last year to $12.47 per share on an adjusted basis when converted to dollars, and revenue is expected to reach approximately $13.2 billion.

Investors will also be watching profit margins. Remember that ASML is the only company in the world that manufactures extreme ultraviolet lithography machines, which are essential for producing those advanced chips.

ASML shares have risen by more than 70% year-on-year.

The big question for investors is: Can demand for chips and their technology continue to support ASML’s growth and justify continued gains? Okay, now it's time to tighten the ropes around " ASML".

Before we move on to your trading examples, folks, we need to know each of your views on the backbone of the advanced chip industry. ASML is essentially in a class of its own .

Yes, lithography solutions are what ASML does, and the good news for them is that they are raising prices by 10% for Samsung and SK Hynix.

This will take effect from January. Two things will happen; Their core revenues will increase in the short term. As for upgrading their tools, companies will implement it more quickly in the medium term.

So, this is very good news for them, because of their ability to raise prices.

You mentioned that they are the only company in this field. So, they do that.

Therefore, I expect them to exceed expectations and raise them, and I expect the fourth-quarter guidance to be very important. I think the details of the pricing moves will be very important to them, but you know, Diane, this is a company that does really important things for AI and is raising prices on two of its biggest clients .

Now, Tom, what do you think of "ASML"? Yes, in its latest earnings report, the company provided a range of between 11 and 12 billion euros for the current quarter in terms of estimates.

The fact was mentioned that they do not have a real competitor in this field .

It only takes one, two, or three years to get some of these facilities up and running. So, if you look at the range they are aiming for, the cost of their machines is $400 million per unit , right?

This is on the high side depending on the configuration here.

They expect to sell around 65 units this year, up to 85 units by 2027 and 110 units by 2028. So, they seem to have the guidance trajectory they want in terms of growth.

Kevin stated that they are already raising the prices of these machines because they are in very high demand at this stage.

Now, the stock is up nearly 60% so far this year. Is a lot of good news already built into this company's valuation? They have, as you know, limitations at the moment where their customers cannot take delivery of some of these machines because they do not yet have the foundry or factory expansion.

Therefore, we will have to wait for some clarity on this from the company after the earnings announcement. My demo account trading is in the bullish camp.

Given the expected move of 79.70, we will round it up to $80 . Look at where the stock is at around $1700. That leads me to make a call option at 1780. Buy the call option at 1780 for October 23, and sell the call option at 1780 for October 16.

It was trading at around 12.20. I don't know . These markets are very large. Prices are inconsistent everywhere. It appears to be trading at a price closer to $8.5 or $9 now.

You should do price discovery for these deals. Trading. The markets are quite broad and volatile, so the values of these spreads seem to move a lot from day to day, so I don't know where they are traded.

I'm not really sure, Tom, but this is a one- week call option calendar looking at an strike price of 1780. Yes, let's analyze this trade. This trading model gives you an upside exposure.

Weekly options for October 23rd expire in 10 days. Buying a call option at an execution price of 1780, and selling the same call option at 1780 in the monthly options for October 16 that expire in just 3 days.

You pay a discount of approximately 12.20 for that. It is trading at a price closer to $8.5.

Kevin stated that discovering the price was justified. Individual bid and ask price differences for options are very wide at this stage. So, there is a slight lack of liquidity. Therefore, discovering the price is justified.

You might be able to pay $8 for this. You might be able to pay nine, less than nine dollars for the offer. Therefore, some price discovery is justified. Now, the stock has declined slightly. This may have led to a price reduction.

But the discount you pay, if you pay $8, is $800. If you pay as we have here in the example of 1220, that is $1220 per spread, this gives you exposure to the upside.

Here you can see that profitability peaks at or near the strike price where you execute the calendar around 1780, which represents roughly one standard deviation move that the options market prices in a one-day move, plus or minus about $80 in either direction.

So, this gives you that exposure to the upswing. But while you are targeting 1780 to maximize profitability from this trade, you likely have a range between 1700 and possibly 1850 or 1860 on the upside to be profitable in this trade.

So, while you're targeting 1780, you already have a range where you can be profitable. You are buying roughly 51% implied volatility in the 1780 call options for October 23rd as a whole in that options series, and you are selling roughly 73% implied volatility as a whole on October 16th where you sell the 1780 call option.

So this volatility dispersion lowers the entry point price, but this is not a cheap wide one-week calendar either.

Keep that in mind, but this is not a cheap stock. It costs $1700. So, while maintaining risk identification, you know exactly how much you are at risk in this.

The discount you pay for this position gives you exposure to the upside. What you don't want to happen is for the stock not to fall or to stay at this level, or for the stock not to rise much above approximately 1850.

This is where you also start to lose profitability.

But remember that the discount you pay is your risk , and you also have some assignment risk in the short sell option over the next three days.

So, this is the exposure to the upswing. How so, I was a little more negative in this trade as I sold a neutral to bearish vertical buy option outside the price range here.

I went to about one standard deviation . I sold the 17 option in the October 16 monthly options, as an example of a really short-term trade here. Sell the call option at 1770 and then buy the call option at 1780.

You will collect a balance of approximately 250, as we mentioned previously when the price discovery was justified.

You might be able to collect more than that, maybe $3 , or $3.50, or maybe $2. So keep that in mind, but if you get a balance of 250, that's what you can earn at a risk of $750 per difference, but it raises the breakeven point, Kevin, to 1762.50 upwards.

So it's roughly the single standard deviation move that options markets price into this neutral to bearish short vertical position, how come? Yes, I think now for our viewers, look what Tom has done here.

He took the expected movement, and he took the stock's trading price, did n't he? He made the execution price of 1780 his long purchase price , and sold at 1770.

Why did he do that? Well, a bigger premium, right ? He doubts his ability to achieve a $72 move at the earnings event. Therefore, the short execution price is placed within the expected movement and the long purchase price is placed at the exact movement.

What does he gain from that? The trade-off is that he got a larger premium than he would have gotten if he had sold at 1780. These are some of the decision-making processes we do daily and almost hourly when you look at it and develop your habits as you do it.

Tom took the expected movement and then moved a little inwards, making the long option where the movement was and got a bigger bonus. Yes, I think if you look at it, my position is a little more negative, but again Kevin's position is more range-bound upwards as well.

I think the ideal thing is for the stock to climb to around 1770 and settle there, and both are probably mostly profitable here, Diane, in these ASML example centers.