After announcing last week that the company will be entering the chip-making market for personal computers, Nividia Corp. (NVDA) shares have spiked 18 percent.
The recent price run has led to a major spike in implied volatility, causing option premiums to jump in price. We expect that the run higher may be nearing an end and the stock will enter into a consolidation phase.
Combine this with the potential for a systemic pullback in equities, and we again are looking to sell volatility through a February iron condor, which meets the criteria for the expectation of range bound trading.
We can capture premium through both time decay and drop in implied volatilities. We have structured the iron condor to expose less risk to the upside in exchange for more risk to the downside.
The company has earnings tentatively announced for February 18th, meaning we will likely remove this position prior this (first month in February). We will look to capture about $600 of the potential $1,040 maximum gain on this trade.
Trade Idea:
SELL -20 IRON CONDOR NVDA 100 FEB 11 21/22/17/15 CALL/PUT @$0.52 LMT
Trade Details:
Type: Unbalanced Iron Condor
Expiration Month: February
Breakeven Level(s): $16.48 & $21.52
Maximum Gains: $1,040
Profit Taking Level: $600
Maximum Loss(es): -$2,960
Stop Loss:-$225
