I know that most of you bought my recommendation on September 29, 2022, to buy the NVIDIA (NVDA) January 2025 $270-$280 out-of-the-money vertical Bull Call spread LEAPS at $0.50 or best, so I thought I’d give you an update.
Since I sent out this trade alert, (NVDA) shares have catapulted from $127 to $1,050, a gain of 8.27 times, or 827%. Today, the middle market for the LEAPS is $9.20, a gain of 18.4 times, or 1.840%. And this is a position where you never risked more money than you put up.
Those of you who bought this in size have already retired and will never work another day in their lives.
Such is the incredible power of LEAPS.
Of the 38 LEAPS I have issued over the past three years, 36 are at max profit. Only (UNG) and the last (TLT) are sucking hind tit. But they still have eight more months to run. The final bell has not been rung….yet.
There are many more LEAPS recommendations to come from the Mad Hedge Fund Trader. However, you will find I issue many more of these at market bottoms than tops. Timing is everything.
For your edification, I have included the original trade alert below.
Trade Alert - (NVDA) – BUY
BUY the NVIDIA (NVDA) January 2025 $270-$280 out-of-the-money vertical Bull Call spread LEAPS at $0.50 or best
Opening Trade
9-29-2022
expiration date: January 17, 2025
Number of Contracts = 1 contract
Keep in mind that NVIDIA is one of the most volatile stocks in the market. You don’t have to buy it today. A big selloff would be ideal. But it should be at the core of any long-term LEAPS portfolio.
If you are looking for a lottery ticket, then here is a lottery ticket.
While the chance of winning a real lottery is something like a million to one, this one is more like 2:1 in your favor. And the payoff is 19:1. That is the probability that NVIDIA shares will double over the next two years and four months.
Santa Clara-based NVIDIA designs and manufactures high-end, top-performing graphics cards or GPUs. There is probably one in your PC. They are essential in the artificial intelligence, automobile, PC, supercomputing, cybersecurity, and gaming industries.
They are also crucial for national defense. The Biden administration recently banned NVIDIA from exporting high-end chips and their manufacturing equipment to China, which they were using to build sophisticated weapons to use against us. This revenue loss is what has taken the shares down to their current low levels, down 65% in six months.
NVIDIA has long been one of the fastest-growing US companies, Since 2005, its annual net income has soared from $89 million to $9.7 billion. Its NVIDIA Titan V graphics processing unit used for supercomputing architecture sells for an eye-popping $2,999.
And before you ask, NVIDIA is an abbreviation for the Latin word for “envy.”
To learn more about the company, please visit its website at https://www.nvidia.com/en-us/
I am therefore buying the NVIDIA (NVDA) January 2025 $270-$280 deep out-of-the-money vertical Bull Call spread LEAPS at $0.50 or best.
Don’t pay more than $1.00 or you’ll be chasing on a risk/reward basis.
January 2025 is the longest expiration currently listed. Please note that these options are illiquid, and it may take some work to get in or out. Executing these trades is more an art than a science.
Let’s say the NVIDIA (NVDA) January 2025 $270-$280 out-of-the-money vertical Bull Call spread LEAPS are showing a bid/offer spread of $0.50-$1.50. Enter an order for one contract at $0.50, another for $0.60, another for $0.70, and so on. Eventually, you will enter a price that gets filled immediately. That is the real price. Then enter an order for your full position at that real price.
Notice that the day-to-day volatility of LEAPS prices is minuscule since the time value is so great. This means that the day-to-day moves in your P&L will be small. It also means you can buy your position over the course of a month just entering new orders every day. I know this can be tedious but getting screwed by overpaying for a position is even more tedious.
Look at the math below and you will see that a 112% rise in (NVDA) shares will generate a 1,900% profit with this position, such is the wonder of LEAPS. That gives you an implied leverage of 19:1 across the $270-$280 space.
(NVDA) doesn’t even have to get to a new all-time high to make the max profit. It only has to get back to $270 where it traded last March.
Only use a limit order. DO NOT USE MARKET ORDERS UNDER ANY CIRCUMSTANCES. Just enter a limit order and work it.
This is a bet that NVIDIA will not fall below $280 by the January 17, 2025 option expiration in 2 years and 4 months.
Here are the specific trades you need to execute this position:
Buy 1 January 2025 (NVDA) $270 calls at………….………$11.00
Sell short 1 January 2025 (NVDA) $280 calls at…………$10.50
Net Cost:………………………….…….…..…………...........….....$0.50
Potential Profit: $10.00 - $0.50 = $9.50
(1 X 100 X $9.50) = $950 or 1,900% in 2 years and 4 months.
To see how to enter this trade in your online platform, please look at the order ticket below, which I pulled off of Interactive Brokers.
If you are uncertain on how to execute an options spread, please watch my training video on “How to Execute a Vertical Bull Call Debit Spread” by clicking here.
The best execution can be had by placing your bid for the entire spread in the middle market and waiting for the market to come to you. The difference between the bid and the offer on these deep-in-the-money spread trades can be enormous.
Don’t execute the legs individually or you will end up losing much of your profit. Spread pricing can be very volatile on expiration months farther out.
Keep in mind that these are ballpark prices at best. After the alerts go out, prices can be all over the map.
