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) – BUY
BUY the NVIDIA (NVDA) May 2024 $710-$720 in-the-money vertical Bull Call debit spread at $8.80 or best
Opening Trade
4-10-2024
expiration date: May 17, 2024
Number of Contracts = 12 contracts
We just had a nice $140, or 14.36% dip in NVIDIA shares. I don’t mind going long this stock going into the April 22-26 conference in Hanover, Germany where they almost certainly have only good news to announce. The superfast Blackwell chips also hits the market in the coming quarter and there will be a lot of hoopla around that.
The sky high implied volatility for the options of 41.5% makes this easy to do so as we are paid richly to take a position. By comparison, the implied volatility for the S&P 500 is a lowly 12.2%. That’s the implied you get when markets grind up almost every day for five months.
Another positive is that the Mad Hedge Market Timing Index just hit a new 2024 low at 54, giving is a rare long side entry point.
This is a rare case where I plan to buy high and sell higher.
With markets this one way, you have to put in your bids on one of the few days when everyone else is throwing up on their shoes.
It helps also that the market is not too expensive and overbought, with an S&P 500 earnings multiple of 21X.
I am therefore buying the NVIDIA (NVDA) May 2024 $710-$720 in-the-money vertical Bull Call debit spread at $8.80 or best.
Don’t pay more than $9.30 or you’ll be chasing on a risk/reward basis.
Only use a limit order. DO NOT USE MARKET ORDERS UNDER ANY CIRCUMSTANCES. Just enter a limit order and work it.
NVIDIA is so far ahead of the competition that no one will catch up for years. What the (NVDA) bears don’t get is that the company has a moat so wide it is impossible to cross. Their enormous lead in software is the result of crucial platform decisions made 20 years ago. The key staff are all looked up with ultra-cheap equity options with strike prices around $1-$2.
Virtually everyone has now raised their upside targets for the stock over $1,000/share. That’s because with a price earnings multiple of on 30X, it is still the biggest Big Tech stock in the market. By comparison, its biggest customers, (META) is at 34X, AI Leader (MSFT) is at 38X, and (AMZN) is at 63X. Efforts by Alphabet to break into the AI chip business are feeble at best.
Every 15% correction in (NVDA) over the last two years has been a strong “BUY”. It owns the AI manufacturing business. It’s looking at $250-$500 BILLION in sales growth per year over the next several years.
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.
If the highest growth sectors in the economy are Robotics, AI, and energy storage, (NVDA) is in the sweet spot of every one of these.
And before you ask, NVIDIA is an abbreviation for the Latin word for “envy.”
To learn more about the company, please visit their website at https://www.nvidia.com/en-us/
This is a bet that NVIDIA will not fall below $720 by the May 17 option expiration in 27 trading days.
Here are the specific trades you need to execute this position:
Buy 12 May 2024 (NVDA) $710 calls at………….…...……$167.00
Sell short 12 May 2024 (NVDA) $720 calls at……………$158.20
Net Cost:………………………….………..............………….….....$8.80
Potential Profit: $10.00 - $8.80 = $1.20
(12 X 100 X $1.20) = $1,440 or 13.63% in 27 days.
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.
