Cashing In On Nvidia’s Blowout Quarter

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Bigger Than The German Stock Market

One of the crazy figures bandied about after Nvidia‘s (NVDA) record quarter is that stock’s market cap is now greater than the market cap of all of Germany’s stocks combined. 

ZeroHedge has been all over the details of the lead AI chipmaker’s quarter, so let’s talk about how we made money on it. 

Step One: Be Bullish On Nvidia

In our post here earlier this week (America’s Next Financial Crisis), we closed with a note about making hay while the sun still shined: 

And our weekly top names have returned 23.26% over the next six months, on average, since we started our trading Substack. 

Our system updates its top ten names every day the market is open though, and our #1 name as of Monday’s close is reporting earnings this week. Later today, we plan to post an options trade on it, one with a potential upside of about 200% versus a potential downside of 100%. 

Later that day, we posted about our #1 stock on our trading Substack. That stock was, of course, Nvidia. 

In our post, we noted that in addition to our system being bullish on it, two sites that predict earnings saw Nvidia beating estimates this week:

The Portfolio Armor web app runs the calculations every day the market open, though, and posts its top names each evening. The stock that was its #1 name on Monday is releasing earnings this week. In addition to our system being bullish on it, Zacks Earnings ESP is bullish on it, as is Estimize.

Step Two: Estimate Nvidia’s Post-Earnings Move

By looking at premiums on Friday expiration ATM (at-the-market) options on Nvidia earlier this week, we saw the options market was pricing in a move of about 7% up or down after it released earnings. To be a bit more conservative, we planned on a 5% move. 

Step Three: Set Up The Trade

With Nvidia trading at about $950, our trade was a vertical spread expiring on May 24th, buying the $990 call and selling the $1,000 call for a net debit of $3. The max loss per contract was $300, the max gain was $700, and the break even was with NVDA at $993. That trade filled at $3.

Step Four: Exiting The Trade

With that kind of call spread, the max gain would be to sell it for the full spread $10, which would be possible just before the options expired at Friday’s close, if Nvidia was still trading at over $1,000 then. Our goal was to exit before then, though, so we set up a GTC (Good ’till canceled) order to exit the spread at a net credit of $9.45. With NVDA trading at about $1,050 earlier today, our exit trade filled at a net credit of $9.45, for a gain of 215% from our entry price of $3. 

If you’d like to tail on our next earnings trade, feel free to subscribe to our trading Substack/occasional email list below. 

If you want to stay in touch.

You can scan for optimal hedges for individual securities, find our current top ten names, and create hedged portfolios on our website. You can also follow Portfolio Armor on X here, or become a free subscriber to our trading Substack using the link below (we’re using that for our occasional emails now).