3 Momo Stocks That Were a No-No Are Now a Go-Go

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In my previous article on momentum stocks from June 12, I laid out a bearish (or at least non-bullish) case for Tesla Inc (NASDAQ:TSLA), Amazon.com, Inc. (NASDAQ:AMZN) and Nvidia Corporation (NASDAQ:NVDA) — my self-named TAN trio.

3 Momo Stocks That Were a No-No Are Now a Go-Go TSLA AMZN NVDA

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That assessment proved to be pretty accurate, as all three stocks have struggled to head higher and pulled back since that time. As the market looks to have found some semblance of a floor at current levels, I think now may be an ideal time to add some bullish put credit spread trades in TSLA, AMZN and NVDA to hedge the previous bearish call credit spread trades.

By selling the put spreads versus the call spreads, we end up with an iron condor trade that has a wide margin for error. Given that implied volatility (IV) is at recent highs on all three stocks, we can also get a bigger safety cushion for the same price.

IV spikes also tend to be a reliable signals of intermediate lows in the underlying price, furthering the case for bull put spreads.

So let’s take a look at these TAN trade ideas that use major technical support levels to help structure the trade.

MOMO Stocks to Buy: Tesla (TSLA)

MOMO Stocks to Buy: Tesla (TSLA)
After making new all-time highs at $386.99, shares of Tesla have since fallen nearly $25 to close at $361.61 on Friday. Major support looms at $325 on TSLA, and implied volatility is at the recent highs.

CEO Elon Musk tweeted on Sunday that the all-important Model 3 passed regulatory requirements two weeks ahead of schedule, which should provide a positive backdrop for Tesla stock.

Sell the TSLA Aug $320/$315 put spread for 70 cents net credit or better.

Potential return on risk is 16%.

MOMO Stocks to Buy: Amazon.com (AMZN)

MOMO Stocks to Buy: Amazon.com (AMZN)

After rising to fresh new all-time highs of $1,017 , shares of AMZN have fallen back $49 to close below the magical $1,000 level at $968 on Friday.

Major support is at the $925 area and implied volatility (IV) is just below recent highs. A recent survey by RBC Capital Markets shows the dominance Amazon enjoys in the internet retailing space. Amazon Prime alone takes in $6.4 billion in annual revenues. A cash cow indeed.

Sell the AMZN Aug $920/$915 put spread for a 90-cent net credit.

Potential return on risk is 18%.

MOMO Stocks to Buy: Nvidia (NVDA)

MOMO Stocks to Buy: Nvidia (NVDA)

After trading at record all-time highs of $168.50, shares of NVDA have since dropped nearly $24 to close at $144.56 on Friday. Major support is at the $135 level and IV is at a six-month high. InvestorPlace contributor Josh Enomoto laid out a well-researched thesis on the advantages NVDA enjoys in the red-hot cryptocurrency space which should provide additional downside support.

Sell the NVDA Aug $125/$120 put spread for a $1.20 net credit.

Potential return on risk is 24%.

The TAN stocks are all approaching some major support levels and carrying heightened levels of implied volatility. This combination many times proves to be a profitable combination for bull put spread strategies.

As of this writing, Tim Biggam did not hold a position in any of the aforementioned securities. Anyone interested in finding out more about option-based strategies or for a free trial of the Delta Desk Research Report can email Tim at timbiggam@gmail.com.

Tim spent 13 years as Chief Options Strategist at Man Securities in Chicago, four years as Lead Options Strategist at ThinkorSwim and three years as a Market Maker for First Options in Chicago. Tim makes weekly appearances on Bloomberg TV  “Options Insight”, Business First AM “Trader Talk”, TD Ameritade Network “Morning Trade Live” and CBOE-TV “Vol 411” to discuss everything from volatility and option related.


Article printed from InvestorPlace Media, https://investorplace.com/2017/07/momo-stocks-to-buy-tsla-amzn-nvda/.

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