Despite rising concerns about the artificial intelligence hype train, the AI sector continues to see incredible returns. If you really want to scalp a quick profit, you may consider the Invesco AI and Next Gen Software ETF (NYSEARCA:IGPT). It turns out, the IGPT ETF offers compelling math that you can potentially exploit.
On Monday, Super Micro Computer (NASDAQ:SMCI) shares skyrocketed as it was selected to join the benchmark S&P 500 index. With this inclusion comes the prestige and the attention of major investors, not that it lacked in this area. Since the start of the year, SMCI stock gained a remarkable 276%. In the past 52 weeks, it’s up almost 1,000%.
Of course, with such a meteoric ascent comes skepticism. In November, Business Insider reported that more than half of tech workers stated they felt AI is overrated. As several AI-related enterprises reach seemingly unjustifiable earnings and revenue multiples, fears of a sector-wide correction abound.
However, the counterargument is that euphoria in the space is still red-hot. Because of this dynamic, speculators could secure a quick profit before the window of opportunity closes shut.
Compelling Math Supports the IGPT ETF
As stated earlier, one way to play the AI market is to bet on the IGPT ETF. With this fund, investors have access to a basket of digital intelligence powerhouses, including Nvidia (NASDAQ:NVDA), Intel (NASDAQ:INTC) and of course, Super Micro Computer.
Interestingly, since the beginning of October 2023, the IGPT ETF has been printing an enticing pattern. Specifically, when the opening price of the current session is lower than the prior session’s closing price, there is a 65.2% chance that IGPT will close up.
Chart by Josh Enomoto, InvestorPlace.com
Trade of the Day: Buy IGPT ETF if Tuesday’s Open Is Negative
Now it’s time to exploit this trading dynamic. If Tuesday’s open for the IGPT ETF is lower than Monday’s close of $45.49, we’re going to buy the fund, or rather, its call option.
Specifically, I’m looking at the 21 June 2024 $44 call. On Monday’s close, the premium for the contract was $4. Using Barchart’s options calculator, if the IGPT ETF reaches $46.50 per unit by this Friday, the contract could theoretically be worth $4.59. That’s a 2.2% lift from Monday’s close, which is doable for an on-fire asset.
The idea here is to get in and get out quickly. Win or lose, we don’t want to spend too much time here because of the risk of the call option’s time decay and the unpredictability of the AI sector.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
