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A very strong earnings report off and on the price chart for Nvidia Corporation (NASDAQ: NVDA ) might be enough to make Goldman Sachs blush and buy more at the same time. But considering the steep and swift bullish reaction, it may be a better opportunity to position bullishly in NVDA stock using an "either or" options combination. Let me explain.
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As the market's most venerable financial and political broker, Goldman Sachs takes a lot of heat. Some of it is deserved and maybe some it is not. But when it comes to NVDA stock, its constant drumbeat of analyst support did finally pay off.
On the heels of Nvidia's top-notch corporate confessional , which blew past forecasts and saw management raise its outlook well-above Street views, NVDA stock finally captured Goldman's long-standing $130 price target. But Goldman isn't one to leave good enough alone.
Following the report and Nvidia's analyst day meeting, the firm's Toshiya Hari came out and raised the ante on NVDA stock to $165. The Goldman note cited a deserved multiple expansion from 25x to 31x projected earnings based on the company's more secure position and supportive growth trajectory in key markets such as its GPU data-center and artificial intelligence.
Mr. Hari went on to advise any 'short-sightedness' on the part of skeptical investors unappreciative of Nvidia's dominance, should be viewed as an opportunity to buy more NVDA stock. Based on the NVDA price chart, this strategist couldn't agree more. But as I'll also explain, I like the option to play 'either or' with less worry and respect for the other guy; should Mr. Hari experience more bumps in the road.
NVDA Stock Daily Chart
Click to Enlarge Last month when I wrote about NVDA stock in an April 10 article at InvestorPlace , the technical interpretation was optimistic higher prices would prevail. However, I couldn't fully discount a NVDA price chart which was offering pattern support for both bulls and bears alike.
At the time and denoted by the yellow highlight, optimistically I was looking for some variation of a double bottom to emerge as part of a first-stage corrective base of 21%.
Alternatively, it was acknowledged that from the late December high, NVDA's price movement underscored what could be a head and shoulder topping pattern. It's now obvious which camp won that particular pattern battle in NVDA stock.
Technically speaking, the bullish picture and reassertion of the NVDA uptrend didn't really kick in until the earnings reaction. The strong gap and follow-through led to a successful breakout to new all-time-highs from what we can now definitively label as a double bottom or "W" base.
Looking forward and nearer-term, given the fast and aggressive-looking rally, the inclination is to play NVDA stock long, but only on some type of pullback or corrective action. The anticipated counter-trend action is likely to find loose support from $120 -$128, should it occur. Alternatively, there is always the smaller chance a more modest momentum base could drive Nvidia shares higher and I'd rather not be left out on the sidelines if that scenario plays out.
The good news is for bulls receptive to this 'either or' situation, there is a way to position using a NVDA options combo, rather than waiting or relying on a stock entry at current levels to work.
NVDA Stock Bullish Spread Combo
Given our 'either or' willingness to get long NVDA stock, but enjoying limited risk alternatives to buying shares, a modified fence strategy looks attractive.
With shares of Nvidia at $137.20, the July $145 / $150 bull call spread combined with selling the July $125 / $120 bull put spread is priced for a mid-market debit 35 cents.
What's this spread package offer the trader? At expiration if NVDA stock remains between $125 and $145 the combination will expire worthless and the small debit will be forfeited.
The good news is if Nvidia shares rally during the life of the modified fence, the long delta position could stand to benefit and enjoy profits below $145. Nice.
Above $145, the trader effectively owns a $5 bullish vertical for just 35 cents. Thus, there is a max payout opportunity of $4.65 above $150 at expiration. Even nicer.
But what about if the 'short sightedness' of investors comes into play? On the downside the fence combo maintains a breakeven of $125.35.
Risk is also limited to $5.35 below $120 because the short $125 put is offset with a long put at $120 as part of a vertical. Thus, should investor anxieties turn even more severe, this bullish trader could always begin a campaign of buying shares at a discount to an already attractive breakeven level of $125.35. And that could be the nicest opportunity of all.
Investment accounts under Christopher Tyler's management do not currently own positions in any of the securities or their derivatives 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 .
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The post Buy Nvidia Corporation (NVDA) Stock for 35 Cents Now! appeared first on InvestorPlace .
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
