When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline.
Trade Alert - (NVDA) – SELL – STOP LOSS
SELL the NVIDIA (NVDA) May 2024 $740-$750 in-the-money vertical Bull Call debit spread at $7.40 or best
Closing Trade
4-22-2024
expiration date: May 19, 2024
Number of Contracts = 12 contracts
I am going to stick to my firm 2% of capital stop loss rule and unload this position.
There comes a time in every trader’s life when it’s time to face harsh reality and admit that you’re just dead wrong.
As much as I thought a I had strong case for the best stocks to move sideways before continuing their upward drive, the markets decided otherwise. One thing I have learned over my half-century of trading is that you never argue with Mr. Market. He is always right.
So it was with some dismay that on Friday, I watched NVIDIA (NVDA) shares slice through its 50-day moving average at $840 like a hot knife through butter putting the shares into a free-fall. Virtually, the next print was the low of the day at $760, down 10% on the day.
There was no new news about (NVDA). Its prospects look as bright as ever, and there are a series of conferences of earnings reports over the coming month to remind us of that. But sometimes, the market just doesn’t care.
(NVDA) has had a great run, up some 144% since October. During this time, I executed a dozen profitable long-side trades. But when you’re that aggressive you know in advance that the last trade is going to kill you and that is the case today. (NVDA) is falling because of the sheer weight of its price.
New flash: while (NVDA) is still the cheapest big tech stock in the market, but cheap stocks can get cheaper as we all know.
With the advantage of 20/20 hindsight, I should have been paying more attention to the Magnificent Seven 50-day moving averages which have been falling like dominoes. First went Tesla (TSLA) in February and Apple in March. The S&P 500 (SPY) gave it up on Monday and Microsoft (MSFT) on Wednesday. Amazon (AMZN), (META), and (NVDA) were the last to go on Friday.
Sure you can blame the April 19 option expiration when traders were loaded to the hilt with expiring longs with all these stocks they had to dump. The dreaded month of May, where traders go to die, and the summer doldrums are just two weeks away. Algorithms poured gasoline on the fire exaggerating the moves, as they always do.
But still, wrong is wrong.
I am therefore selling the NVIDIA (NVDA) May 2024 $740-$750 in-the-money vertical Bull Call debit spread at $7.40 or best.
Only use a limit order. DO NOT USE MARKET ORDERS UNDER ANY CIRCUMSTANCES. Just enter a limit order and work it.
This was a bet that NVIDIA would not fall below $750 by the May 17 option expiration in 30 trading days.
Here are the specific trades you need to close out this position:
Sell 12 May 2024 (NVDA) $740 calls at………….........…..……$73.00
Buy to cover short 12 May 2024 (NVDA) $750 calls at………$65.60
Net Proceeds:………………………….………..…………..................$7.40
Loss: $8.60 - $7.40 = $1.20
(12 X 100 X $1.20) = $1,440.
If you are uncertain about how to execute an options spread, please watch my training video 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.
