Short term
Trade view / 05 December 2016 at 13:43 GMT

Income strategy with Nvidia options — #SaxoStrats

Product Manager, Options Trader, Educator
Denmark
Instrument: NVDA:xnas
Price target:
Market price:
 
Background

Shares of Santa Clara-based semiconductor player Nvidia have been hot this year, rising some 170%. The chipmaker seems to be dominating the graphics space, particularly in video games, virtual reality, and having recently secured a place in self-driving cars. 

The short-term pullback from a high of $95.25 to Friday's close of $88.45 could present investors with a good entry. Instead of buying the shares outright, we are going to use a short put spread. 

Let's walk through setting this up.

nvda
Source: Saxo Bank

Management and risk description

The downside is limited in a short put spread...


nvda
Create your own charts with Saxo Trader click here to learn more.
Source: Dynamic Trend

Parameters

(Investors can now use the new combination order ticket available as of last Friday on the legacy Saxo Trader (downloadable) for this strategy.)

Underlying price: $88.45

Sell -1 30 December 16 87 Put 
Buy 1 30 December 16 85 Put
------------------------------------------
Net Credit  $0.84

Maximum gain: net credit or $0.84

Maximum loss: width of spread minus credit ($2-$0.84) = $1.16

ROR= 72%

* all calculations are assumed at expiration, the trade makes sense if one collects at least 60% ROR

Entry: today at the open.

Stop: no physical stop.

Target: shares to trade >$87 at expiration.

Time horizon: 25 days.

— Edited by Michael McKenna

For more on contract options click here.

Non-independent investment research disclaimer applies. Read more
3y
vsquare007 vsquare007
Hi there, i find it difficult to put entry order with credit spreads with saxo go. How do i ensure i get the pricing as the current different is around 54c instead of suggested 84c. You should upgrade the software to allow multi leg option spreads and advise the way like TOS platform from ameritrade ?
3y
Georgio Stoev Georgio Stoev
Hi, the combination order is available only on SaxoTrader desktop and not on GO.
3y
ChristianK ChristianK
The combination order works fine on SaxoTrader desktop. However, the net credit declined much as soon as the market opened. Do you recommend to change the levels as long as the net credit is 60% ROR or more? Thanks
3y
Market Predator Market Predator
I understand GO as emergency solution. Very good for inspection of current positions. Platform independent, robust HTML5 (no Flash or other stuff), BUT really simple design. I can hardly compete with desktop version, both are different worlds.... What really bother is fact, that no way to have launched both platform simultaneously (e.g. GO on my tablet just in bedroom and full solution desktop version in trading room).
3y
Georgio Stoev Georgio Stoev
Hi Christian, we had a gap up at the open which caused the credit to shrink. We didn't get a fill on our trade at 0.84 either. You can adjust up slightly, i.e. 90/88 showing 0.70 as of last night.
3y
Georgio Stoev Georgio Stoev
Market Predator, it's a good feedback I for one like to be connected at all times through different devices. We are coming up with PRO next year which will replace ST. Very exciting!
3y
ChristianK ChristianK
Got it. Will have another go after the market opens. And stick to min 60% ROR. I am also looking forward to the combined order functionality in GO.... Thx
3y
ValeriyKZ ValeriyKZ
Georgio , may you update your parameters(recomendation), basis new price???
3y
Georgio Stoev Georgio Stoev
yes, sell/buy -1 30 December 16 90 put/+1 30 December 16 88 put, net credit of $0.70

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