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) – EXPIRATION AT MAX PROFIT
EXPIRATION of the NVIDIA (NVDA) October 2023 $370-$380 in-the-money vertical Bull Call debit spread at $10.00
Closing Trade
10-20-2023
expiration date: October 20, 2023
Number of Contracts = 11 contracts
Just to be clear, this position does not expire until the option tomorrow, Friday, October 20 at 4:15 PM.
As I suspected, there would be much downside in NVIDIA shares after the first 25% drop in the summer. So many people are trying to get into the leading AI play of our age that there seems to be an endless bid below.
As a result, you get to take home $1,210 or 12.36% in 14 days. Well done and on to the next trade!
During periods of no market direction like this one with an ultra-low Volatility Index ($VIX), traders flock to the few corners of the options market where the payout is still big.
That would include NVIDIA (NVDA), whose options have the second highest implied volatility of any major company after Tesla.
It helps also that the market is not too expensive and overbought, with an S&P 500 earnings multiple of 19X. While the stock market keeps moving sideways, stocks are getting cheaper and cheaper as earnings are still growing at a decent rate.
You don’t have to do anything with this expiration.
Your broker will automatically use your long position to cover your short position, canceling out the total holdings.
The entire profit will be credited to your account on Monday morning, October 23 and the margin freed up.
Some firms charge you a modest $10 or $15 fee for performing this service.
The flight of money right now is from small, undercapitalized, and questionable to large, overcapitalized, and rock solid.
Analysts always make projections based on extrapolating current demand. What they don’t take into account is the fact that NVIDIA’s products are being designed into new products at an incredible rate.
As a result, every portfolio manager has to own (NVDA) or risk getting fired, unless they run a value fund. I fully expect to see $1,000 a share in the next year.
It’s also hard to imagine NVIDIA’s stock not going ballistic when Tesla’s EV production is rocketing from 1 million to 20 million in ten years.
But that’s just me.
I’m always looking at the ten-year view. I have been doing so since 1970. It pays big time.
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. It is the one stock every portfolio wants to buy on the dip.
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 was a bet that NVIDIA would not fall below $380 by the October 20 option expiration in 1 trading day.
Here is the specific accounting you need to close out this position:
EXPIRATION of 11 October 2023 (NVDA) $370 calls at………….…...……$69.38
EXPIRATION of short 11 October 2023 (NVDA) $380 calls at……………$59.38
Net Proceeds:…………………………..........………..………….…......................$10.00
Profit: $10.00 - $8.90 = $1.10
(11 X 100 X $1.10) = $1,210 or 12.36% in 1 day.
