Momentum lovers continue to flock to Nvidia Corporation (NASDAQ:NVDA). And why shouldn’t they? It offers one of the best uptrends in the universe, not to mention volatility in spades and juiced up options just begging for a trade. NVDA has settled into a small range since the turn of the year making now a perfect time to analyze its next move.
As with any proper charting session, we begin with the trend. NVDA stock’s price trend is a thing of beauty. Driven by rapidly improving fundamentals and growth expectations, the chipmaker has been a dip-buyers paradise. Any and all retracements have followed the bullish script – shallow and short-lived.
All major moving averages are stacked in bullish fashion. The 20-day is above the 50-day, the 50-day is above the 200-day. It doesn’t get much cleaner than that, folks.
Late last year, Nvidia’s run for the ages was finally halted by stiff resistance at $120. On the support side, watch the century mark (that’s cool-speak for $100) moving forward. A break below that will signal its first support breach in many months and therefore warrant some caution.
On the options front, implied volatility is pumped. The IV rank sits at 70% suggesting option premiums are at one of the highest levels of the year.
That means option buyers have to pay up for their wares while option sellers are capturing some hefty premiums.
Play the Odds With NVDA Put Spreads
There’s no need to bet against the beast at this point. So buck up and join the ever growing throng of Nvidia Corporation lovers — but do it with class. February bull put spreads should do the trick. It’s a clever way to express your bullish view while capitalizing on juiced up option premiums.
Sell the Feb $85/$80 bull put spread for 55 cents or better. The max gain is limited to the initial 55 cents and will be captured if Nvidia sits above $85 at expiration. The max loss is $4.45 and will be forfeited if the stock falls below $80 by expiration.
To minimize the damage if things turn sour, consider bailing if NVDA stock falls to $85.
At the time of this writing, Tyler Craig owned bull put spreads on NVDA.