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) – TAKE PROFITS
SELL the NVIDIA (NVDA) August 2024 $137-$140 in-the-money vertical Bear Put debit spread at $2.98 or best
Closing Trade – NOT FOR NEW SUBSCRIBERS
7-31-2024
expiration date: August 16, 2024
Number of Contracts = 40 contracts
As I expected, the poster boy for Big Tech excess, NVIDIA, absolutely took it on the nose when the mania faded. As a result of this short position, we managed to seize near the max profit in only four trading days.
With the implied volatility for (NVDA) then at a sky-high 53.11%, one of the highest in the market, I felt like I absolutely had to do something about NVIDIA. With only 15 days left until the August 16 option expiration, it was time to take another shot on the short side.
It worked.
I am therefore selling the NVIDIA (NVDA) August 2024 $137-$140 in-the-money vertical Bear Put debit spread at $2.98 or best.
As a result, you get to take home $1,920 or 19.20% in 3 days. Well done and on to the next trade.
Only use a limit order. DO NOT USE MARKET ORDERS UNDER ANY CIRCUMSTANCES. Simply enter your limit order, wait five minutes, and if you don’t get done, cancel your order and lower your offer by 2 cents with a second order.
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 customer, (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 their website at https://www.nvidia.com/en-us/
This was a bet that NVIDIA would not rise above $137 by the August 16 option expiration in 15 trading days.
Here are the specific trades you need to close out this position:
Sell 40 August 2024 (NVDA) $140 puts at………….……...….…$36.00
Buy to cover short 40 August 2024 (NVDA) $137 puts at……$33.02
Net Proceeds:………………………….……………..…........................$2.98
Profit: $2.98 - $2.50 = $0.48
(40 X 100 X $0.48) = $1,920 or 19.20% in 3 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.
