Here’s how I traded $NVDA and $META – August 5, 2024
Dan Fitzpatrick here at StockMarketMentor.com. It’s August 5th and this has been one of the most interesting days in the market with a pretty nasty move down, especially after Friday’s nasty move.
The Dow ( DJI: .DJI ) is down as well. The NASDAQ ( IINDEXNASDAQ: NDX ) is down a lot as well. What’s the one thing you see in common with all these? I’ll tell you, all of these are much higher than they opened, like here, about 3 percent higher. The NASDAQ Composite ( INDEXNASDAQ: .IXIC ), almost 4 percent.
The Dow ( DJI: .DJI ) is the one that interests me the least because it’s 30 stocks that are in the S&P 500 ( INDEXSP: .INX ), down. That’s a big deal. The S&P 500 ( INDEXSP: .INX ) is up, up nicely. So what’s my takeaway from this (I’ll just use the S&P)? I’ll tell you what my takeaway from this is, it’s time to sell puts. Because we don’t know how far up the price is going to go before it runs into all of this supply.
This is all the buying from last week and the week before. There are a lot of folks who are not very happy with the way this goes, and they’ll do what I call, “I want my money back trade.” So you’ve just got a lot of overhead pressure there. And you see the same thing with the NASDAQ Composite ( INDEXNASDAQ: .IXIC ), up in this area.
You can see it with the individual stocks that there’s a lot of overhead supply here. But what I’m looking at on these, and this is really important and it’s going to make you money. What I’m looking at here is, on Microsoft ( NASDAQ: MSFT ) for instance, the selling volume is declining a lot. This here is almost 43 million shares, on Friday this is down to below 30 million shares.
Now today, I don’t know what it’s going to be because I’m doing this and we still have over two hours to go in the trading day. Frankly, I could actually see this be higher, I don’t know, you’ll know when you look at the video because I think we’re getting some buying here. I think we’re getting a pretty decent round of buying, and so I will look at all these real quick.
NVIDIA ( NASDAQ: NVDA ), this was a screaming buy here and that’s exactly what I did. Meta ( NASDAQ: META ) is a great buy here, and that’s exactly what I did too. But the bottom line is this, the good trade here, the option trade is truly the low-risk trade. Because you can look at this here, and the low of the day is 450.80.
What are the chances are that Meta ( NASDAQ: META ) is going to come down and test this level? I don’t think so. And so what you do is, you wind up selling puts. If you wanted to be quasi-aggressive you could sell the 450.00 puts and they would expire. You sell them and they expire on the 16th of this month, so there’s really not that many days left, 11 days left. The idea is, it’s going to stay up here.
If you really wanted to be a little bit of a wussy boy, and that’s fine, you can do that too. I don’t think there’s any problem with trading that way, you can set it at 445.00 instead. The idea is that you’re not going to have this stock put to you, and if it is, you’re happy to do it, you’re happy to buy the stock. That’s the only thing.
And then here on Microsoft ( NASDAQ: MSFT ), you sell the 390.00s. Wouldn’t it be nice if ou got to buy this stock at $390.00, particularly when you’re getting paid to do it? So you get paid several dollars to buy this stock here at 390.00. And so you can do this with all of these things. You can do it with NVIDIA ( NASDAQ: NVDA ). I knew this when I looked at the news on Saturday, I think it was, maybe it was yesterday. They announced that they’ve got a delay in their Blackwell chips because of a design flaw, which by the way, they’ll fix.
The point is that this stock gapped down a lot. At one point it was almost at $90.00, which was a very, very deep retracement, over $34.00 from this high. So how low do you think this can go, do you think it can go lower than here? I doubt it, and they report earnings on the 28th. And by the way, I don’t think that delay in the Blackwell chip is going to affect their earnings report because that’s history, as opposed to now.
I look at NVIDIA ( NASDAQ: NVDA ) as another stock that you can sell puts on. You can sell the 90 puts or you could sell the 95s, which is what I did. I didn’t sell them right at the exact bottom here, and the reason was that I was selling other puts at the bottom. And I was buying stocks, and I was buying calls. But I’m out of most of those now because that was my trade.
You can say, well why don’t you hold on to them? The reason is because that wasn’t my trade. If my trade was, I wanted to hold on to them, then I would be holding on to them. So these are all trades that I think you can take and make good money.
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