On the date of publication, Tim Biggam did not have (either directly or indirectly) any positions in the securities mentioned in this article. It is also a hedge against the bearish call spread I recommended in my previous article on NVDA stock. This eliminates any earnings related risk. The spread expires before earnings, currently estimated for late August. It is also well below the support area at $175. The short $175 strike provides a 11% downside cushion to the $195.94 closing price of NVDA stock. Maximum gain on the trade is $35 per spread. Sell NVDA Aug $172.5/$170 put spread for a $0.35 net credit. It is so important to lower risk in this type of market environment we are currently experiencing. It allows one to position bullishly on an oversold NVDA stock in a defined risk manner. Selling an out-of-the money bull put spread makes probabilistic sense. This means option prices are more expensive, which favors option selling strategies. The recent drop in both NVDA and the overall market has caused implied volatility (IV) to pop significantly. Fortunately, the options market provides a lower-cost way to be a buyer on a further leg lower.
Buying just 100 shares would still cost nearly $20,000. Now that the pullback has come to fruition, my bearish outlook has turned somewhat bullish-because price does matter.īuying NVDA stock outright is both risky and rather expensive, even after the split.
I noted how both the technicals and fundamentals had reached an extreme and recommended a bear call spread to position for a pullback. I had a decidedly more bearish outlook for NVDA stock in my last research piece on June 25. I am certainly far from a perma-bull on NVDA. 7 Great Momentum Stocks to Buy Before July Ends
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