On January 10, 2017, we noted:
By far, NVDA was the best performer on the markets. Then, in recent weeks, it came under attack from a short seller, who argued that increased competition could send the stock back to $90. To me, though, that’s laughable with the stock likely to move aggressively higher from support at $100.
We’re not concerned about downside.
In fact, we have a price target of $120 on the stock after it found support.
Better yet, the company just partnered with German automaker, Audi to bring autonomous cars to the market by 2020. And, on January 6, 2017, B. Riley, Needham, and UBS reiterated their buy ratings on the stock.
And, with further industry consolidation likely, coupled with the growth of the Internet of Things (IoT), upside appears to be unlimited for related stocks.
There are two ways to trade NVDA here. One, you can buy the underlying stock up to $110. Two, you can sell to open the NVDA February 105 put for a credit of $7.30. Or three, buy to open the NVDA February 110 call at market.
If you traded each of those, you’ve done quite well so far.
On January 10, the stock traded as low as $105.63. It’s now up to $111.77.
If you sold a put on the February 105, you had an opportunity to collect a credit of around $7.50. As long as this expires worthless, you get to keep that premium. As the underlying stock slips more and more, the put is now worth $3. That’s great news.
Finally, if you bought the NVDA February 110 calls, which traded at $7.70 that day, you’re down slightly. But we expect for the trade to close in the money.