When John identifies a strategic exit point, he will send you an alert with specific trade information on 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 PUTS
BUY the NVIDIA (NVDA) August 2024 $137-$140 in-the-money vertical Bear Put debit spread at $2.50 or best
Opening Trade
7-26-2024
expiration date: August 16, 2024
Number of Contracts = 40 contracts
With the implied volatility for (NVDA) now at a sky-high 53.11%, one of the highest in the market, I feel I absolutely have to do something about NVIDIA. With only 15 days left until the August 16 option expiration, it’s time to take another shot on the short side.
We just had a nice $8, or 211% rally off of a $37 selloff in NVIDIA shares this year. The downtrend is still intact, so I don’t mind going short this stock this far out of the money for 15 days. I think the upside momentum is broken for the short term and that we have entered a wide trading range for the shares.
By comparison, the implied volatility for the S&P 500 is a lowly 10.37%. That’s the implied get when markets grind up almost every day for eight months.
Since October, the forward price-earnings multiple for (NVDA) has rocketed from 25X to 40X, making it one of the most expensive big techs in the market.
I am therefore buying the NVIDIA (NVDA) August 2024 $137-$140 in-the-money vertical Bear Put debit spread at $2.50 or best.
Don’t pay more than $2.70 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.
Don’t get me wrong. I still love NVIDIA for the long term and think it could top $200 someday.
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 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.
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.
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/
This is a bet that NVIDIA will not rise above $137 by the August 16 option expiration in 15 trading days.
Here are the specific trades you need to execute this position:
Buy 40 August 2024 (NVDA) $140 puts at………….........………$26.00
Sell short 40 August 2024 (NVDA) $137 puts at………….......…$23.50
Net Cost:………………………….……………..….................................$2.50
Potential Profit: $3.00 - $2.50 = $0.50
(40 X 100 X $0.50) = $2,000 or 20% in 15 days.
If you are uncertain about how to execute a bear put 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.
