Nvidia Corporation (NASDAQ:NVDA) is once again showing attractive-looking prospects both off and on the price chart that point toward continued upside for NVDA stock. But for bullish investors, this strategist once again sees an out-of-the-money call spread as the stronger way to big profits with less risk. Let me explain.
From data center dominance, artificial intelligence and deep learning, gaming, autonomous autos and of course these days, a strong presence in the mining of cryptocurrencies, NVDA stock is no stranger to investors’ radars. And it shows. Shares of Nvidia have soared over 400% the past couple years.
But if you’ve been waiting to buy into Nvidia’s secular growth story, the time is once more looking ripe for entry.
Aside from 2018 shaping up as a continuation of Nvidia flexing its muscle off the chart, albeit at a slower pace, NVDA stock is now aligning itself with a lower risk entry into the name. And as I’ll discuss below, in conjunction with a reduced and limited-risk options strategy, it’s time to mine some coin into big profits today.
NVDA Stock Daily Chart
Looking at the weekly chart of NVDA from left to right and it’s our observation there is strong technical support for fresh highs within the existing uptrend still to come.
No doubt, Nvidia has enjoyed a massive percentage run since catching the fancy of bullish momentum traders in 2016 below $40 a share. The price action which continues to support higher prices though is NVDA stock’s latest corrective move.
NVDA backed off the recent high of $218.67 by a healthy, but run-of-the-mill 17% decline before finding technical support on top of a prior breakout from an ascending wedge base.
Now, the corrective move appears ready to reverse higher with shares signaling an oversold stochastics condition after forming a bullish hammer followed by a couple weeks of inside consolidation work.
NVDA Stock Bullish Call Vertical
Back in September I detailed an October bull call spread as NVDA was breaking out of the ascending wedge pattern. The strategy captured its max payout of $3.50 for a return of 233%.
Currently, and given the technical view is for continued upside, but one also tethered to the current price pattern holding, a vertical position is still a favored vehicle to play Nvidia shares long.
Looking at today’s options board and NVDA at $197.70, the February $210 / $215 call spread is viewed as an attractive combination. Similarly priced for $1.50, the vertical can expand to $5.00 and deliver profits of $3.50 if shares are above $215 at expiration.
The position requires NVDA stock to rally about 8.5% from current prices over the next couple months in order to reach its full profit potential. Given Nvidia’s track record, factoring in lesser growth and an earnings catalyst in early February, additional mining of profits still looks very reasonable.
Investment accounts under Christopher Tyler’s management do not currently own positions in any securities 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 and StockTwits.
