Trade of the Day: Nvidia (NVDA)

Recommendation: Nvidia (NASDAQ:NVDA) Puts

NVDA provides graphics chips for smart phones and personal computers–and theirs is a cyclical industry that’s gapping down. The stock broke below support at $12 and looks like it could fall quickly to $10. Here is the best way to play more weakness in Nvidia…

Buy the Nvidia (NVDA) Jan 11 Put  at a suggested price of 60 cents ($60 per contract).

After taking the position, enter a good-til-cancelled contingent order to sell this option if the stock hits its target price of $10.40. That should give you an option price of about $1.10, for an 83% profit.

Close this position and cut losses if the stock closes above $13.10, when the option price should be about 30 cents. The stock is currently trading at $11.59. The computer-simulated probability of this option hitting its target price is 23%.

Ken Trester is editor of the popular Maximum Options program. Trester has been trading options since the first exchanges opened in 1973 with a winning streak that goes back to 1984 with money-doubling average annual profits since 1990.

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