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☕ Three ways to trade Nvidia’s earnings

May 22, 2024

Good morning! 👋

The markets are mixed as all eyes await His Excellency and Chipus Maximus, Jensen Huang.

Here’s my playbook.

1 – Three ways to trade Nvidia

It’s “show me the money” day for Nvidia which reports after the bell. (Read)

If you’ve been keeping up, you know that I’m expecting revenues to be 200+% higher and a jump in earnings that could be 400+% higher. Perhaps quite a bit more.

Critics like Gerber Kawasaki are raising concerns that the company is “fairly” valued, and that growth is priced in, both of which I disagree with and both of which – I might add - are essentially the same arguments they’ve been voicing since mid to late 2022 when shares traded below $150.

My view was and still is different.

I repeatedly told investors in no uncertain terms to buy, that NVDA would take out $500, $700 and then $1,000 and/or split.

I hope you did.

We’re within $50 of that target this morning as I type but, to be fair, there has been no official word about a split although I’ve heard a few analysts warming up to my idea (as if it’s their own, mind you) 🤦‍♂️

So, what to do?

Professional traders have been very careful not to tip their hand which means handicapping this afternoon’s call and picking an appropriate trading strategy is challenging.

Options suggested an 8-9% move last time I looked but that’ll obviously change this morning by the time you read this. Historically, that’s lower than the 12-15% priced in ahead of prior earnings calls because “everybody” knows something big is coming.

The situation was similar ahead of Walmart’s most recent earnings which is why I recommended a straddle (which several of you kindly let me know you aced). Well done, btw!!! 😊

If you’re a trader...

Buy an ATM straddle – meaning simultaneously buying both a call and a put at the money – within the last hour of trading or if prices drop mid-day which may be the only “tell” we get that the game is afoot. This is a great, low hassle strategy to play along no matter which way prices go. Plan on selling/exiting tomorrow no matter what. Keep the risk small and limited to money you can afford to lose entirely.
Sell Cash-Secured Puts, particularly if traders try to take prices lower into the final minutes of trading. This jacks volatility while allowing you to collect more premium and sell deeper with a higher probability than you could otherwise. This is obviously a margin-eater because the stock is super expensive at $950ish a share so it’ll be beyond the grasp for most.
Sell a put spread deep out of the money to accomplish the same thing with similar odds of success but limit risk to the difference between the two strike prices you chose. It’s a less margin intensive alternative.

If you’re an investor...

Enter a LowBall Order to buy shares at $875 or less, roughly 8% below today’s price. Then another at $810 or so... both strikes are within statistical norms as I type but far enough down that you can confidently know you’re buying shares at a discount if the markets give you that opportunity.
Do nothing. I’ve been investing in NVDA all along and am comfortable letting the chips fall where they may. I know I want to own shares long term and plan on buying more regardless of price over time. So, I’m going to enjoy the view from the peanut gallery.

As always, do NOT try these trading strategies if you don’t have the chops.

And if you have no idea what I am talking about but would like to learn, consider joining the One Bar Ahead® Family. Learn more.

2 – She who shall remain nameless is getting an upgrade

Amazon is apparently going to give “she who shall remain nameless” an upgrade – so that Alexa who supposedly isn’t listening but usually is - can compete more effectively with AI powered chat-bots.

As usual, there’s a catch.

Reports suggest that the expected subscription will not be included in Prime membership pricing.

MyPOV: Not a needle mover. Alexa was once super innovative but strikes me as the Peloton of voice assistants today. I know what’s going to disappear from our house quickly, especially if Apple has got an upgrade for Siri in the wings.

3 – UBS says time to move out of cash – doh

CNBC reports that UBS is telling clients that it’s now time to move out of cash because it sees opportunity. (Read)

Ummmm.

The S&P 500 has risen an astounding 28.65% over the past 12 months while companies like Nvidia have tacked on 7X that.

Keith’s Investing Tip: If you are waiting on research from traditional Wall Street firms – and many investors do because they don’t know any better or refuse to acknowledge reality - chances are good that you and your money are going to continually be late to the party. Wall Street is driven by two things... a herd like mentality and the desire not to get sued. Learning to think for yourself is one of the single most important and potentially profitable things you can do.

4 - “Of course Target’s hurting!”

Sometimes all the headlines in the world don’t matter, all you’ve got to do is check with your better half.

Case in point... I walked into our kitchen this morning to grab a cuppa hi-test and was greeted to the sound of my wife’s voice as she raised her hands in exasperation while reading the headlines.

“Of course, Target’s hurting – duh!” (Read)

Indeed.

People are buying less groceries and less stuff and, I might add, going to Walmart.

Speaking of which, I suggested a while back that investors who were thinking along the same lines should consider buying Walmart and shorting or avoiding Target. That’s playing out nicely given that the former has returned 32.78% over the past 12 months while the latter is down –2.98% over the same time frame.

Keith’s Investing Tip: We talk frequently about buying the best and ignoring the rest which, in this case, is particularly true. Meanwhile and forgive me for being a bit self-serving, there’s only one retail stock I recommend owning and it’s returned 66.62% over the past year. OBAers know all about it. Best, indeed!

5 – Email hygiene

Just a quick reminder if you like the 5 with Fitz.

Please regularly clean out your email trash.

ISPs will refuse to deliver the 5 with Fitz if they can’t cram another email into your mailbox because its full.

This, in turn, means a) we have no choice but to remove digital hoarders if we want to remain in good graces with the spam gods and b) you won’t get the 5 with Fitz.

You wouldn’t think this is a thing, but it is.

Thanks for taking a moment 😊