DailyPlay – Opening Trade (NVDA) – June 2, 2022

View NVDA Trade

Strategy Details

Strategy: Short Put Vertical Spread

Direction: Bullish

Details: Sell to Open 2 Contracts June 17, 2022 $182.5/$167.5 Short Put Vertical Spreads @ $5.12 Credit.

Total Risk: This trade has a max risk of $1,976 (2 contracts x $988 per contract). 

Counter Trend Signal: This is a Bullish strategy on a stock that is experiencing a bearish trend.

1M/6M Trends: Neutral/Bearish

Technical Score: 2/10

OptionsPlay Score: 86

Entering the Trade

Use the following details to enter the trade on your trading platform. Please note that if there is a multi-leg option strategy, it should be entered as a single trade. 

Investment Rationale

First and foremost, the SPX is seeing some buying into the zone (4130—4020) I said need to hold on a pullback after last week’s 6%+ rally. Yesterday’s low reached 4074 – roughly halfway down into that zone before seeing the close at 4101.

So, if I look at a name that may have also bottomed last week and is now holding onto support in between that low and where it is now trading, I come across the very actively traded NVIDIA Corp. (NVDA). Its chart shows a daily -13 bottom downside exhaustion signal that then rallied and yesterday’s low ($181.22) held above its bearish Propulsion Momentum level ($179.92). That’s potentially bullish, so let’s play for this to continue higher to test the nearest Propulsion Exhaustion level at $197.15.

Let’s sell a short-dated June 17 $182.5/$167.5 put spread for a $5.13 credit, taking in about 34% of the strike differential, based upon yesterday’s closing mid-prices. When/if the price reaches the above target near $197, I can already tell you that we’ll want to remove half the position.

NVDA – Daily