9:39 AM EST on Sep 4, 2024
Trade Alert: Bought Nvidia (NVDA) at $104.73 in SW Portfolio
We bought Nvidia (NVDA) this morning at $104.73 in a new September 4, 2024 portfolio. We also bought the December 18, 2026 Nvidia $90 call-options at $43.80. We bought in with a 15% portfolio allocation.
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bought some nvda at $105，would you explain your thoughts behind buying the $90 Dec 2026 call? thx
So if you’re asking why December 2026, the reasoning for using long dated options can be explained here:
https://sam-weiss.com/investing-basics/time/
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Also, while this chapter is still in rough draft form and not yet indexed to the site, this here explains why we prefer In the money options versus out of the money options. Normally, we would’ve gone deeper in the money. But with Nvidia having dropped 20% already I felt about 15% in the month was sufficiently insulated. At $90 a share, Nvidia would need to fall a total nearly 40% from its peak a few weeks ago to put those out of the money. Again, this is in rough draft form and we’ll be indexing it this week:
https://sam-weiss.com/investing-basics/inherent-leverage2/
Yes, I’ve read the article on why picking long dated options; however I was more interested in why you picked in the money options this morning . I’m learning and appreciate your in-depth explanation. thx
btw, you mentioned NVDA “might” touch lower than $104 as a true bottom. I used “might” as with AVGO’s earning report due tmw plus Friday’s Non-Farm payroll, there’s a chance it’ll go there or just shoot up from here. Looking forward to your afternoon brief on the situation.
So that second link I posted is brand new. It’s not even indexed yet at all. It explains my reasoning for ALWAYS choosing ITM options over OTM options. They’re just far less risky, provide better leverage than margin/levered ETFs and weather corrections/crashes much much better than OTM options.
It is especially useful when buying near the lows of a correction. If you go DITM to slight ITM after a major sell-off –like the 20% correction we just saw in Nvidia — you significantly increase the likelihood of producing a return and mitigating a potential crash.
Just look at the financial crisis as an example. Many tech stocks peaked just as we entered the New Year (January 1, 2008). If an investor had bought just after MLK day (January 22, 2008) and they had purchased DITM call options expiring in 28-30 months in Apple, Google, Amazon or any other major tech name at the time, those investors would have been deeply in the green by the time we reached expiration in March 2010. They would have gone through the entire financial crisis and came out deep green on the other side.
So that’s why we choose in the money options. And it’s also why we choose longer dated options. Both those things taken together create strong leverage while creating inherent mitigating factors to weather market turmoil.
Hi Sam,
When do you close your position on LEAP options and common stock?
Not for a very long time. So here’s how we plan to proceed there. When the next set of leaps are related, we’ll sell calls against our position and use the capital to roll forward. It’s a tax neutral strategy which allows us to maintain long-term capital gains treatment while continuing to mitigate our risks.
Hello,
Can you compare ETF Leverage X5 or X6 with options ITM ?
Best
Karl
hi, when do you think NVDA will be re testing AH and the 130 barrier. And do you believe NVDA will have to touch sub 100s in order to do so.
NVDA may very well fall under $100 again and could test the lows. We’ve seen Nvidia (NVDA) consolidate after some pretty significant run ahead of another leg higher. And that is to be expected. It would be literally impossible for NVDA to keep up the pace of gains that we’ve seen over the past 18-months.
I think a lot of investors got carried away with these extremely high valuation expectations. I was hearing people throwing out numbers like $7 trillion and $10 trillion market caps.
I think what we’re seeing now is more profit taking and consolidation than anything else. The earnings were phenomenal across the board. Revenues were ahead of analyst expectations. Guidance was ahead of analyst expectations. The revenue trajectory and analyst expectations for 2025 and 2026 point to Nvidia moving up to the $150 to $170 trading range at some point in the next 12 to 18 months. Probably a lot sooner than that.
But just like we saw between July and January of last year, Nvidia is simply consolidating ahead of its next leg higher. So I’m not remotely worried about the current trading range or the trading action we’ve seen since earnings. That’s all going to reverse course and Nvidia will go on a huge revaluation run as it typical does.
As for when I think Nvidia will push trough the $130 barrier, I still expect that to happen between now and January.
Sam, I assume you’d add NVDA to your Sept 4 portfolio when QQQ gets closer to 450, or you’d just treat NVDA on its own trend say :
1. if NV gets closer to the low 100 (which is not unlikely with the current sentiment)
or
2. just add more between 104-110?
Just want to get some kind of reference. tia
So the reason I didn’t buy a full position is in case Nvidia decides to retest its lows. There are a few situations that can develop here. Nvidia can form a low and push back up to and through $120, breaking the downtrend and sending it on a new big rally higher. Or it could easily retest the lows if the sentiment starts to get super bearish.
If I feel like we’re going to see a breakout run, then we’ll get long up near $120+. If not, then we’ll wait for Nvidia to breakdown under $100 and use it as a strong buy opportunity.
The reason we’re treating the NASDAQ-100 separately is because the NASDAQ-100 has barely moved lower. It’s only down 5.7% from its $485 peak. At $450, it’s only 11% below its all-time highs. It’s not oversold. It’s simply not as strong of an opportunity at the moment. But that can change.
Really, we probably should have added something this morning when the QQQ hit oversold conditions. That way if it does start to climb from here, we at least have some exposure.
But as Nvidia is concerned, I’m thinking more along the lines of $90-$99 in order to add to my position. I think with Nvidia hitting extremely oversold conditions, we may see a sharp rebound followed by another leg lower. That leg lower may or not form another instance of oversold conditions. But chances are we get a new low below the $104 low set earlier today.
understood. By looking at the chart, I think we have a good chance to see NVDA retest $100 /90’s very soon. I might also grab some LEAP options like what you did this morning. thx!!!
I’m curious to hear your thoughts on choosing Apple and Nvidia as two tech stocks to buy on top of the QQQ, as opposed to say Google or Meta
Anything in particular about these two companies fundamentals that make them more attractive to you over the others? Thanks
So by being long the NASDAQ-100, we’re already exposed to all of those stocks obviously yeah. We’re essentially a tech portfolio. The reason for adding Nvidia and Apple over Google or Meta is that I believe Apple and Nvidia are simply better stocks. Ai is the future of tech and Nvidia is clearly the dominate player in the sector. Apple is a cash printing machine and likely the most fundamentally sound company in the entire stock market. The iPhone isn’t going anywhere pretty much ever. There’d need to be a whole new innovation at this point. And so with the company constantly reducing its share count through stock buybacks and generating the cash it’s generating, it’s a place we want to be.
Also, I’ve been in Apple since before the iPhone was announced. I was in it back in the iPod era when the iPod mini came out (2004-2006 era). So I simply know a lot more about Apple than I do the other two. Though I was in Meta when it crashed during the bear market. The stock took a near 80% haircut.
I’ll also add that Meta’s chart right now looks kind of bearish. It has formed a sort of triple top looking pattern. Google on the other hand is testing its 200-day moving average and down nearly 20% from its highs. Like Nvidia, it may be at a buying opportunity.
You picked AAPL besides NVDA and QQQ in your portfolio. Can you share your view on it? also AMD? Currently I have SPY, QQQ and NVDA, I’d like to diversify my portfolio a bit. thx
That’s actually very diversified when you think about it. If you’re long the SPY and QQQ, you’re invested in funds that own roughly 600 stocks. Though there’s a lot of cross over between the SPY and QQQ. Probably more like 550 stocks.
Just being in the SPY and QQQ makes you relatively well diversified. Also, as exchange traded funds are concerned, iShares and Invesco are among the most reputable safe funds to be invested in.
The entire point of buying Nvidia and Apple is gain a much greater exposure to Ai and money printing (iPhone). That’s all that is.
I just read your reply to the other member on why you chose Apple over other mag7 stocks. Apple had a good run recently, I’m not sure now is a good time to add it to my portfolio, I’ll wait until you make the move. Thx