Sometimes opportunity does not come when you expect it. With the worst start to September since WWII you would not normally be looking for bullish trades.
When opportunity knocks you have to open the door. Sometimes you don't get a second chance and you can spend years regretting your decision. Tonight's new play is not nearly that dramatic but I do believe it is one we should not pass up.
I think the market is oversold and ready for a bounce. Whether that bounce lasts for hours, days or weeks is of course unknown. All we really need it to do is give us a positive entry on this play and then not self-destruct in the very near future.
When you look at the portfolio graphic I would not be concerned about some of the numbers. Remember, the majority of our new plays are VERY long term and we should not become concerned about the day to day changes.
Current Position Changes
New Short Put Recommendations
New Covered Call Recommendations
New Long Term Recommendations
NVDA - Nvidia $13.18 (Short Put, Long Call)
After the bell today the Nvidia CEO stunned reporters with a shocking increase in revenue expectations and technology upgrades for years into the future.
CEO Jen-Hsun Huang said Android tablets running quad-core processors will be available later this year. Since this year only has a little less than four months remaining that is a big claim. He expects the company to expand its smart phone processor capability into regular phones with sales of one billion by 2015. Today Nvidia has sales of $4.5 billion in its GPU business and $2 billion in mobile processors. By 2015 he expects that to reverse to a whopping $20 billion in mobile processors and $7 billion in GPUs. The stock rallied to $14 in after hours.
Nvidia is one of those companies in the right place at the right time. The GPU concept enables not just dual core or quad core technology but hundreds of processor cores in one desktop computer. This technology did not exist 3-4 years ago and now they are doing $4.5 billion a year in sales. GPU Description
Nvidia has a large percentage of the processor business in the super smartphones and tablets. That $2 billion a year business is expected to expand by 1000% over the next three years thanks to their move into the "normal" smartphone market. They are gaining serious market share on a daily basis.
The stock has suffered because of the market and competitive announcements. This is a volatile industry and a volatile period. Just this week we had three new tablet announcements with deliveries expected by year-end. The pace of technology today is amazing and Nvidia will power a lot of those new deliveries.
I think we could see Nvidia back over $25 by January 2013, market willing. Worst case I don't expect it to trade much lower than it did in August when it set a bottom at $12. I am going to recommend we sell the Jan 2013 $15 put, currently $4.40 and buy the Jan 2013 $12.50 call, currently $3.85. Obviously both will change at the open on Wednesday thanks to the spike to $14 in the after hours trading but we should be able to get pretty close to a breakeven on the entry. By purchasing the $12.50 call it will already be $1.50 in the money and anything over $12.50 in 2013 will be profit.
Buy NVDA Jan 2013 $12.50 Call, currently $3.85, no stop, no target.
Sell short NVDA Jan 2013 $15.00 Put, currently $4.40, no stop, no target.
Chart of Nvidia - Daily
Chart of Nvidia - Weekly
New Aggressive Recommendations
Existing Play Recommendations
Links to original play recommendation
COG - Cabot Oil & Gas (Short Put)
VIX - Volatility Index (Naked Call)
BAC - Bank of America (Long Term)
BAC - Bank of America (Update 8/31)
DRC - Dresser Rand (Long Term)
WLT - Walter Energy (Long Term)
BZH - Beazer Homes (Long Term)
MDR - McDermott International (Long Term)
BK - Bank of New York Mellon (Long Term)
GLBL - Global Industries (Long Term)
There are several different formulas for determining margin requirements for naked put writing. These are normally broker specific and some can require larger margin requirements than others.
Here is the most common margin calculation for naked puts.
100% of the option premium + ((20% of the Underlying Market Value) - (OTM Value))
For simplicity of calculation simply use 20% of the underlying stock price and you will always be safe. ($25 stock * 20% = $5 margin)
Prices Quoted in Newsletter
At Option Investor we have a long-standing policy prohibiting the editors and staff from actually trading the individual recommendations in order to conform to SEC rules concerning trades.
The prices quoted in the newsletter are the end of day prices in most cases.
When discussing fills or stops the prices quoted are the bid/ask at the time the entry trigger or exit stop is hit. This is NOT a price that someone on staff actually got using a live order.
For entry/exit points at the market open the prices quoted will be the opening print. The majority of the time the readers are able to get a better fill than the opening print because of market maker bias at the open.
For trades with an opening qualification the prices quoted will be the bid/ask at the time the qualification was met.
All of these rules normally produce worse prices than an active trader would normally get. Because they are standardized there may be some cases where a price quoted was better than an actual fill. If you received a price that was dramatically different than what was quoted please let us know.