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) August 2024 $70-$73 in-the-money vertical Bull Call debit spread at $2.60 or best
Opening Trade
8-5-2024
expiration date: August 16, 2024
Number of Contracts = 40 contracts
I have only seen a 101% implied volatility for a single stock a few times in my life and this is one of those times. Every time I bought this implied I made money.
This trade has the advantage in that it gets massive support from the 200-day moving average at $80.82. This will be useful when the market quits panicking and returns to looking at the moving average.
For NVIDIA to get down to our upper strike price of $73, the price-earnings multiple would have to drop from 40X to 19. Massive institutional buying will pour in well before that as the company is still growing at 50% a year.
We also have the benefit that the Mad Hedge AI Market Timing Index is at 19, a low for 2024, meaning that this trade has about an 81% chance of being profitable.
I am therefore buying the NVIDIA (NVDA) August 2024 $70-$73 in-the-money vertical Bull Call debit spread at $2.60 or best.
Don’t pay more than $2.75 or you’ll be chasing on a risk/reward basis.
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 increase your bid by 5 cents with a second order. If that gets you nothing, try raising your strike prices by $1.
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.
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 click here to visit their website.
This is a bet that NVIDIA will not fall below $73 by the August 16 option expiration in 9 trading days.
Here are the specific trades you need to execute this position:
Buy 40 August 2024 (NVDA) $70 calls at………….………$31.00
Sell short 40 August 2024 (NVDA) $73 calls at………….$28.40
Net Cost:………………………….………..………....................…$2.60
Potential Profit: $3.00 - $2.60 = $0.40
(40 X 100 X $0.40) = $1,600 or 15.38% in 9 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.
