Nvidia Corporation (NVDA) has been an outstanding outperformer for bulls in this final quarter of 2015. And with strong support behind shares, Nvidia stock appears to have even more opportunity ahead.
Earnings back on Nov. 5 were a crowd-pleaser for NVDA bulls, and rightfully so. The multi-faceted graphics chip platform designer blew past Street top- and bottom-line views, and upped guidance with results supported by strong results from its “GTX gaming platform, high-performance computing, cloud and automotive platforms.”
Investors acknowledged the report with an enthusiastic jump of nearly 14% the following session, while broker MKM Partners upped NVDA shares to a “buy,” stating Nvidia was “expensive but worth it.”
A few weeks later, the price of NVDA stock appears worth it even more.
Nvidia Stock Weekly Chart
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Back in late August during the market’s mini-flash crash, NVDA stock moved lower but failed to hit fresh lows for 2015 and/or display even more severe weakness such as a test of its October 2014 low. That of course, can be appreciated as a good first sign of pending strength.
Additionally, as the market and many stocks rallied initially off the August low, most went on to establish fairly deep pullbacks by the tail-end of September. NVDA did not and in fact was rallying to fresh highs for 2015.
If traders missed NVDA’s first and more subtle sign of strength, the second was certain confirmation of NVDA stock fast becoming a favorite of bullish investors and one to put on the radar for continued technical leadership as the market regained its own footing.
Now with shares of NVDA having added to its initial promise of higher prices, a fresh bullish pattern has developed. A breakout of a tight and flat three-week consolidation is signaling another leg higher for Nvidia stock.
Nvidia Bull Call Vertical Strategy
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Reviewing the NVDA stock options board and shares trading up by about 2% at $32.35 in early trade on Tuesday, the Jan $33/$35 bull call spread for up to 65 cents is viewed favorably.
The spread breakeven of $33.65 compares to an outright January $33 call breakeven of $34.05 and reduction of 38% in the overall premium paid per contract.
As a trader always looking to minimize risk and maximize profits, the more favorable pricing is an extension of reducing time decay and volatility risks and an attractive feature of a vertical spread.
On the downside, a vertical like this won’t show nearly as robust, quick gains as might be possible with an outright long call position. But with the opportunity to realize a return in excess of 205% in several weeks’ time; this vertical is “inexpensive and worth it” as an effective way to position strategically in Nvidia stock.
Investment accounts under Christopher Tyler’s management do not currently own positions in any of the securities or their derivatives mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT.
