Jeff 12:21 pm on Thursday, November 15, 2018
Tags: Earnings ( 3,108 )

NVDA earnings trade

#Earnings Sold to Open $NVDA Nov 16th 185/180 put spreads for 1.11. Short strike is -7.7% OTM, and NVDA biggest downside move was -5.3% (in last 12 quarters)

Jeff 1:33 pm on Thursday, November 15, 2018

Man, I was having a killer Earnings season, then in one week I get slammed with TWLO and Z… and now this! At least I used a spread this time.
- Nick 1:40 pm on Thursday, November 15, 2018
  
  Bummer. Did you have a short call spread too? Today I closed my 11/16 short calls that were paired to my LEAP short put and long call. Just didn’t want to hold it over earnings for the extra dime.
  - Jeff 1:43 pm on Thursday, November 15, 2018
    
    No call spread. It has had such strong moves up before I was skittish. But of course, now the market is what’s skittish, so it’s taking its biggest dive since 2009.
    - fuzzballl 8:06 pm on Thursday, November 15, 2018
      
      Can always close the long put near end of day and take assignment of the stock. No matter how low it goes you’ll get the stock at a basis of only about 3.90 below where the stock happens to be trading. With that strategy you can root for the stock to tank another 30 points during the day tomorrow. Lower the better in this case…
      - Jeff 5:43 am on Friday, November 16, 2018
        
        Thanks, yes, it’s worth considering.
      - idfllwr 6:49 am on Friday, November 16, 2018
        
        I always believed that when assignment occurs it’s at the strike of the short option and not at the current trading price. Or am I wrong?
        
        fuzzballl 6:55 am on Friday, November 16, 2018
        
        You are correct…..but as long as the long is still there to protect the short the loss won’t increase any. Then at near the close book the gain on the long and allow the short to be exercised. The difference should be near the max loss of the spread resulting in a basis in the stock being just slightly underwater by the amount of the spread loss.
        
        With NVDA that could be made back in one weekly covered call sale.
        
        fuzzballl 6:58 am on Friday, November 16, 2018
        
        Of course this is all assuming the position size is small enough to take all the stock. Could also roll the loss into a 2021 long LEAPS position and work it back from there.
        
        I’m still seeing price targets on NVDA of 280 (reduced from 310 LOL!)
        
        Jeff 7:08 am on Friday, November 16, 2018
        
        @idfllwr, in this example, I sold 185/180 spread for 1.10.
        
        If the stock closes the day at 165, I can sell my long put for 15.00.
        
        Stock will then be assigned at 185.00.
        
        For my cost basis, we calculate like this:
        
        185.00 debit, price of stock purchase
        -15.00 credit from selling long puts
        -1.10 credit from selling the spread yesterday
        ————-
        168.90 is how much I effectively paid for the stock.
        
        The stock closes today at 165.00, I only need the stock to rise 3.90 to breakeven on the trade. If it rises more, I have a profit.
        
        Biggest considerations are whether I can afford to buy the stock (I have this trade in 5 accounts, all different sizes), and whether I believe the stock will stabilize/rise in the next couple weeks. Or will it and the market tank?