Nvidia (NVDA) has bounced nicely off the 50-day moving average and is not also back above the 21-day moving average.
NVDA stock closed near the high of the day yesterday. All that could point to bullish price action going forward.
Today, we are looking at an unbalanced iron condor, with a slightly bullish bias.
This can be achieved by trading more put spreads than call spreads.
As a reminder, an iron condor is a combination of a bull put spread and a bear call spread.
First, we take the bull put spreads. Using the January 17 expiry, we could sell two put spreads with the $130-$125 strike prices. That spread could be sold for around $0.75. Selling two contracts would generate $150.
Then the bear call spread, which could be placed by selling the $170 call and buying the $175 call. This spread could also be sold for around $0.45.
Trading two put spreads for every one call spread gives the trade a slight bullish bias, but also more risk on the downside.
In total, the iron condor will generate around $1.95 or $195 of premium.
The profit zone ranges between $128.05 and $171.95. This can be calculated by taking the short strikes and adding or subtracting the premium received.
The maximum risk is $805 on the put side and $305 on the call side.
If we take the premium ($195) divided by the maximum risk ($805), this iron condor trade has the potential to return 24.3%.
A stop loss in this case might be calculated based on 25% of capital at risk, so a loss of around $200.
Below you can see the risk graph showing the profit and loss at expiration and also the T+0 line.
Company Details
The Barchart Technical Opinion rating is a 96% Buy with a Strongest short term outlook on maintaining the current direction.
Long term indicators fully support a continuation of the trend.
Of the 43 analysts covering NVDA stock, 36 have a Strong Buy rating, 3 have a Moderate Buy rating and 4 have a Hold rating.
NVIDIA Corporation is the worldwide leader in visual computing technologies and the inventor of the graphic processing unit, or GPU.
Over the years, the company's focus has evolved from PC graphics to artificial intelligence (AI) based solutions that now support high performance computing (HPC), gaming and virtual reality (VR) platforms.
NVIDIA's GPU success can be attributed to its parallel processing capabilities supported by thousands of computing cores, which are necessary to run deep learning algorithms.
The company's GPU platforms are playing a major role in developing multi-billion-dollar end-markets like robotics and self-driving vehicles.
NVIDIA is a dominant name in the Data Center, professional visualization and gaming markets where Intel and Advanced Micro Devices (AMD) are playing a catch-up role.
The company's partnership with almost all major cloud service providers (CSPs) and server vendors is a key catalyst.
Summary
Unbalanced Condors are a great way to play a neutral to slightly bullish outlook on a stock.
Please remember that options are risky, and investors can lose 100% of their investment.
This article is for education purposes only and not a trade recommendation. Remember to always do your own due diligence and consult your financial advisor before making any investment decisions.
