Share prices of NVIDIA (NVDA) have dropped from record highs this Wednesday as the company’s market capitalization exceeded $3 trillion briefly. However, investors have something to look forward to: a 10-for-1 stock split scheduled for Friday after the market closes. Option Research & Technology Services Director Matt Amberson believes that NVIDIA’s options price is extremely high due to the current share price, making options difficult to negotiate. The split is expected to make trading options much easier, particularly for retail traders who could reap rewards from in-the-money spreads on NVIDIA. Amberson recommends taking a long spread approach to leverage the high volatility and beta of the stock.
He also suggests that retailers purchase call options and then sell call options $5 higher to capitalize on bullish trends, or utilize put options for bearish scenarios. Alternatively, neutral traders could consider both options simultaneously. The risk-reward ratio of these spreads is attractive, and they can be established with a relatively small upfront investment. Leveraging macro data, particularly market announcements and interest rate news, can also enhance options trading strategies for NVIDIA. The high beta of the stock implies that it reacts strongly to external events, making options trading more lucrative on days of significant market updates. Analysis of macro events on a scale of 1 to 4 can aid in determining the potential impact of announcements on NVIDIA stock.
Overall, the imminent stock split offers an opportunity for retail options traders to engage with NVIDIA at a more manageable price point. Strategies such as long spreads and leveraging macro data can enhance the potential returns from trading the stock. As NVIDIA continues to exhibit high volatility and reacts swiftly to market events, options traders need to adapt their strategies to capitalize on the favorable risk-reward scenarios that emerge. Matt Amberson’s insights shed light on the potential benefits of navigating the post-split market and utilizing options to maximize gains in a volatile trading environment.
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https://finance.yahoo.com/video/nvidia-options-plays-ahead-stock-150326166.html
