Nvidia Has been moving great lately so today I bought 5 Calls.
Nvidia (NVDA) had a great earnings report last week and has been moving up since. With the stock down almost $3 today I felt it was a good time to get in. I decided not to buy the stock and buy Calls. Buying Calls is not one of my favorite strategies but in today’s volatile environment I decided not to tie up a lot of money and buy some Calls. It’s a much smaller investment. I bought 5 contracts of the NVDA 1/17/20 $170 Calls and I paid a premium of $15.45. I went with the January Expiration Date for protection. When selling Calls I like shorter contracts so Time Decay is on my side. When buying options I like to go out a bit for a longer contract so Time Decay will not hurt me. I plan on getting out of this Call in a week or 2. I would like to make $1 on the premium for a $500 gain.
Buy to Open 5 NVDA 1/17/20 $170.00 C @ $15.45 ($7725)
I bought these Calls for $15.45. The 5 contracts cost me $7725. If I bought the stock, which was at $168 when I bought the Calls, it would have cost me $84,000. A big difference! The Delta on this option is .53. This means my premium will go up 53¢ for every $1 move in the stock.
This trade is buying an option which can be very risky. However, I bought this option out to 1/17/20 so I have some protection. Since it’s a hot stock I don’t see any problem getting my $500 goal out. I give this trade a Risk Factor 3.
There’s a lot of talk about a recession. I’m not a big believer! Last week we had an inverted yield curve with the US treasuries. This was a 1 day deal! The yields are back to normal. If the yield curves stay inverted for a while it is a sign that a recession might be coming. This 1 day inverted yield curve, I don’t believe will be an indication of an impending recession. That 1 day inverted yield curve caused an 800 point drop in the DOW. FYI an inverted yield curve is when the long term interest rates are lower than the short term rates.
There’s so much algorithmic, computer trading these days, and the buying and selling gets contagious causing big swings in the market. I just hope the word “recession” isn’t used as much. This can reduce the panic buying and selling. Maybe the liberal reporters can go back to “racist” and “white supremacy” and lay off “recession.” lol The word “recession” hits us in the pocket!
Steve
The Options Coach