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What are your options - Nvidia earnings trades
Summary: Our latest article provides a comprehensive overview of 4 distinct options trading strategies. These strategies are designed to capitalize on the anticipated decrease in volatility following Nvidia's earnings release. Each strategy is meticulously crafted to cater to a specific market outlook, offering a robust toolkit for traders. This article serves as a valuable resource for both novice and experienced traders, aiming to enhance their trading acumen and decision-making process in the dynamic world of options trading.
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What are your options: Nvidia earnings trade setups
Today, our focus is on Nvidia, which is scheduled to release its earnings report after the bell. This article outlines 4 options trades that can be set up today, prior to the earnings release. These strategies are designed to leverage the expected decrease in volatility, potentially leading to maximum profits at the opening tomorrow.
The strategies are categorized based on market outlook: bullish, neutral and bearish. Each strategy is a credit strategy, intended to benefit from the earnings announcement tonight. The objective is to establish a position before the close, to fully benefit from the potential decrease in volatility.
The expected move is a crucial factor in these strategies. The expected move of NVDA (on November 20th, for expiration November 24th0 is plus or minus $36.59) Each strategy takes the expected move into account, allowing you to choose the direction based on your outlook. Whether you’re planning to trade today or learn for future earnings events, these strategies provide a practical guide to options trading around major corporate announcements. Let’s proceed to discuss these strategies and prepare for the world of options trading.
Important note: the strategies and examples provided in this article are purely for educational purposes. They are intended to assist in shaping your thought process and should not be replicated or implemented without careful consideration. Every investor or trader must conduct their own due diligence and take into account their unique financial situation, risk tolerance, and investment objectives before making any decisions. Remember, investing in the stock market carries risk, and it's crucial to make informed decisions.
Bullish strategy
- Short/Credit Put Vertical Spread
- Short/Credit Put Vertical Spread
Neutral / range bound strategy
- Short Iron Condor
- Short Iron Condor
Bearish strategies
- Short/Credit Call Vertical Spread
- Short/Credit Call Broken Wing Butterfly
Bullish Strategy
Put Credit Spread on Nvidia Corp (NVDA)
- Underlying Stock: NVDA:xnas, Last Traded at $503.91
- Options Details:
- Sell to Open 1x 470 Put, 15-Dec-2023, Bid/Ask: 11.55/11.65, Delta: -0.2676
- Buy to Open 1x 460 Put, 15-Dec-2023, Bid/Ask: 8.85/8.95, Delta: 0.0497
- Trade Setup:
- Type: Limit, Quantity: 1, Price (Credit): 2.75 USD, Duration: G.T.C.
- Financials:
- Premium (Credit): 275.00 USD
- Margin Impact: 521.45 EUR (can vary according to your margin profile)
- Max Risk: -725.00 USD
- Max Profit: 275.00 USD
- Breakeven: 467.25 USD
- The strategy involves selling a 470 put and buying a 460 put with the same expiration date, resulting in a net credit of $275. The breakeven point is $467.25. This trade has a defined risk of $725 and a defined profit of $275, characteristic of a credit spread that suggests a neutral to bullish outlook on the stock.
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Neutral / Range Bound Strategy
Short Iron Condor on Nvidia Corp (NVDA)
- Underlying Stock: NVDA:xnas, Last Traded at $504.02
- Options Details:
- Buy to Open 1x 575 Call, 15-Dec-2023, Bid/Ask: 5.90/6.00, Delta: 0.1806
- Sell to Open 1x 570 Call, 15-Dec-2023, Bid/Ask: 6.65/6.75, Delta: 0.1984
- Sell to Open 1x 470 Put, 15-Dec-2023, Bid/Ask: 11.60/11.70, Delta: -0.2684
- Buy to Open 1x 465 Put, 15-Dec-2023, Bid/Ask: 10.15/10.25, Delta: -0.2433
- Trade Setup:
- Type: Limit, Quantity: 1, Price (Credit): 2.00 USD, Duration: G.T.C.
- Financials:
- Premium (Credit): 200.00 USD
- Margin Impact: 87.31 EUR (may varry according to margin profile)
- Max Risk: -300.00 USD
- Max Profit: 200.00 USD
- Breakeven Points: 468.00 USD, 572.00 USD
- The net credit received is $200. The breakeven points are $468.00 and $572.00. This trade has a defined risk of $300 and a potential profit of $200, characteristic of an iron condor strategy that suggests a neutral outlook on the stock.
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Bearish Strategies
Call Credit Spread on Nvidia Corp (NVDA)
- Underlying Stock: NVDA:xnas, Last Traded at $504.04
- Options Details:
- Buy to Open 1x 550 Call, 24-Nov-2023, Bid/Ask: 4.75/4.80, Delta: 0.1943
- Sell to Open 1x 540 Call, 24-Nov-2023, Bid/Ask: 6.65/6.75, Delta: 0.2518
- Trade Setup:
- Type: Limit, Quantity: 1, Price (Credit): 3.30 USD, Duration: G.T.C.
- Financials:
- Premium (Credit): 330.00 USD
- Margin Impact: 593.42 EUR
- Max Risk: -670.00 USD
- Max Profit: 330.00 USD
- Breakeven: 543.30 USD
- The strategy involves buying a 550 call and selling a 540 call with the same expiration date, resulting in a net credit of $330. The breakeven point is $543.30. This trade has a defined risk of $670 and a defined profit of $330, characteristic of a call credit spread that suggests a neutral to bearish outlook on the stock.
Call Broken Wing Butterfly on Nvidia Corp (NVDA)
- Underlying Stock: NVDA:xnas, Last Traded at $504.12
- Options Details:
- Buy to Open 1x 560 Call, 24-Nov-2023, Bid/Ask: 3.35/3.45, Delta: 0.1460
- Sell to Open 2x 540 Call, 24-Nov-2023, Bid/Ask: 6.65/6.75, Delta: 0.2505
- Buy to Open 1x 532.5 Call, 24-Nov-2023, Bid/Ask: 8.50/8.60, Delta: 0.2992
- Trade Setup:
- Type: Limit, Quantity: 1, Price (Credit): 1.50 USD, Duration: G.T.C.
- Financials:
- Premium (Credit): 150.00 USD
- Margin Impact: 751.24 EUR
- Max Risk: -1,100.00 USD
- Max Profit: 900.00 USD
- Breakeven: 549.00 USD
- The strategy involves buying a 560 call, selling double the amount of 540 calls, and buying a 532.5 call with the same expiration date, resulting in a net credit of $150. The breakeven point is $549.00. This trade has a defined risk of $1,100 and a defined profit of $900, characteristic of a call broken wing butterfly that suggests a neutral to slightly bullish outlook on the stock, if you're aim is to go for the maximum profit. However, if the initial credit received ($150/contract) fits your trading objectives, you could see the strategy as bearish to neutral: as long as the price of NVDA stays below 532.5, you will keep your initial credit. If it rises higher, you still have the "sweet-spot" which could yield you an extra profit. If it goes above the breakeven you're most probably have max loss.
Conclusion
In conclusion, this article presents a range of options trading strategies to leverage the expected decrease in volatility following Nvidia’s earnings release. These strategies, are categorized based on market outlook and are designed as short volatility strategies. While these strategies provide a practical guide, it’s crucial to remember that investing in the stock market carries risk, and careful consideration is essential when planning options trades. Happy trading!
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Previous "What are your options" articles:
- 08 Nov 2023: What are your options - Disney earnings
- 26 Oct 2023: What are your options - Nasdaq Selling Premium
- 29 Aug 2023: What are your options - Salesforce earnings
- 25 Aug 2023: What are your options - the Qs - Nasdaq etf
- 23 Aug 2023: What are your options - Nvidia - earnings - market reactions
- 21 Aug 2023: What are your options - swing trading semi-conductors - stocks vs options
- 18 Aug 2023: What are your options - using TLT as an inverse proxy for the 10 year yield
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