NVDA (Nvidia) – Gaming Upgrade Cycle – Aug 17th, 2020
Bullish – NVDA – $462.56
The S&P 500 opened this past week within a couple of points of its all-time high but failed to break higher. Investors have continued to seek upside exposure despite overbought conditions, exhausted markets and extreme valuations with the inherent belief that the Federal Reserve will prop up financial markets. We saw fixed income markets sell-off this week, perhaps a warning sign that investors see risks in this thesis. Our base case remains that markets will continue to grind higher until a catalyst bursts this “bubble” as market breadth narrows. With China and US tensions, vaccine trials and stimulus bills, there are no shortage of potential catalysts.
NVDA Trade Idea:
On CNBC’s OptionsAction show on Friday, Tony Zhang looked at NVDA and the upcoming earnings event next week. With a strong gaming upgrade cycle expected this fall after the release of XBOX and PS5 consoles, will offset softer cloud computing revenues. NVDA has one of the strongest relative performance of any technology stock and estimate revisions point to a potential beat. Expecting NVDA to trade higher on earnings, Tony is selling a Sept $450/$415 Put Vertical @ $12.00 Credit. As of Friday’s close, these puts were trading for $12.00 Credit.
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