Transcription
Nvidia has earnings on the 20th, and mark my words, if you have the proper position, which I'm going to show you in this video, you are going to make a ton of money. If you don't have the proper position, you're going to miss out on a lot of cash from Nvidia's earnings. Even worse, if you're up on Nvidia and you don't play it properly on earnings, you may give back a lot of the gains that you already have.
This is the most important week for Nvidia. Mark my words, what's going to happen is Nvidia will beat earnings, but the stock won't rise too much because expectations are already baked in. I'm going to show you a quick clip right now on what the options look like and why the call options are skewed right now. I'll explain to you what "skewed" is, and then I'm going to tell you what Wall Street has in terms of expectations and how we are going to play Nvidia. Watch this clip, and then let's talk about it.
You know I am long. I don't have CS right now, so I don't know. I'll look at something. They're not going to be cheap, that's for sure. Sure, but I do think, though, going into it right before, the skew will be toward the upside. The calls will be more expensive than the puts. I'll look at that. I think it's a more bound setup despite the run in the stock because I just think expectations are lower. Eventually, they have to fail on earnings. Eventually, there's got to be something, right?
So you don't get to go into Vegas and keep betting on one thing and have the hand perform. Eventually... but there are still 85% of the market. Market Tim said it: every other stock that you look at in the sector, the chart is horrendous.
This is the... go ahead, no Ian. Eventually, you will miss. But, I mean, is the miss a function of analysts getting too hyped up over it? And so therefore they're setting the stock up for a miss? If they didn't ratchet up their earnings expectations, they would easily jump over. I mean, it's all a matter, right? It's the context of... it's a point of reference. It's where you're coming into. So Karen's completely right; you would like them to talk it down. The problem is, every time they've talked it down in the past, it's leaped over them, and they've looked silly.
Alright guys, so look, there were two things that were really important that were mentioned. First was the skew, and second here in my notes is them actually having to talk down. They want to talk down Nvidia, but they can't, because every time they talk down, they beat earnings. So now they don't talk down on Nvidia, which is an issue because they mention something along the lines of you can't keep playing the same hand in a casino and expect to win.
Let me explain to you what this means. First of all, the calls are skewed, and there's more investors looking to buy calls. That's because there are more bulls on Nvidia than bears. That's very interesting, and that's one of the warning signs that I have for a stock that may be reaching a peak. That's why I said that you know basically, mark my words, I think that Nvidia will have good earnings, but it won't rise more than 10%. That's a really big bold statement from me, but that's pretty much what I'm sure of, because I believe that they're going to continue to beat earnings.
It's very clear about the trend; however, the expectations in the market are so rosy. They are very bullish from all investors, including myself, that we are not going to be able to really pop on this stock like 20, 30, 40% like there were in the past because of expectations.
So let's go over how the chart actually looks like. I'm going to go over my position on Nvidia and how I'm playing it because I am going to give you two different plays on Nvidia that both will be profitable and make money. I'm 90% sure. Obviously, can't guarantee; I'm not a financial adviser, and I can't predict the future. But this is how I'm going to be playing Nvidia and what I think is really smart in terms of the skew on the options.
We already talked about that and the expectations. So now it all comes down to where our expectations are, because the stock market, the way you make money is by making smart bets that beat other players of the stock market. This is a really tough game where we're trying to take money from other smart people. Luckily, I've been at this for 10 years; Uncle Henry has your back.
So let's go into this, right? Look, I personally have a very unique view on Nvidia. Okay, now my view isn't the most unique because I'm bullish, but I am moderately bullish, which is very different from just being a blind bull. There are a lot of blind bulls that just hold on to a stock, and they're kind of blind to when a stock pulls back. That's not me. I'm always looking for upside opportunity, but I'm also looking for pullbacks. I'm also looking to hedge, and I'm looking to be smart with my money.
Right, so when it comes to Nvidia, I have a few hundred shares in this portfolio. In my other portfolio, I have just thousands of shares of Tesla that I'm just holding. I'm not doing covered calls. I'm not selling puts. I'm not doing options at all on my Nvidia position in my other portfolio because I have been so bullish, and because we are in a bull market, I have had shares of Palantir, Tesla, and Nvidia—the three top stocks that I've covered on this channel over and over again because I'm so bullish, and I have been 100% correct on that. I hope that you've made boatloads of money on these plays.
I've actually left my shares uncovered, guys, uncovered, which is kind of weird from an option YouTuber who's been making option videos for years and is the OG on the wheel strategy. There are three strategies I'd be running right now. The first one is literally just having your shares uncovered, just going into earnings and letting your shares run. However, I will say that some of us have bigger positions, and we should be playing options to a certain extent.
So right now, what I'm doing in my main portfolio here, which I've been documenting from a couple thousand up to almost 4 million now, is I have shares, and I've been selling different types of options. So let me explain to you these different types.
First of all, I have a 148 covered call into Nvidia. That's not going to be that good because I do think Nvidia could go up to 150. So first of all, this is something that I'm personally going to have to close, and I personally will have to roll on my Monday call in Discord. I'm going to have to roll this higher because 148 is a little low, and I don't want to lose my Nvidia shares.
Remember, when you're doing a covered call, you get income from selling a covered call, right? You sell a call option, and you get income from selling that call, right away. That cash enters your account immediately. However, now you may lose your shares if the stock goes above the strike price. In this example or this position, if Nvidia were to go to 150, 155, I would lose my shares. I don't want that, so I will be closing out this 148 covered call, and I will be selling a 155 covered call that will capture earnings.
Okay, let me show you what that looks like. Alright, let's talk about the first position, which is going to be a covered call. If I go to sell a call option, we can capture earnings by just going for November 22nd. Right now, Nvidia will have earnings on November 20th, so on November 22nd, if I sell a call, that will capture earnings.
You can see how if I go up here to 150, for example, this is an okay option. The implied volatility is wild; it's 101% implied volatility. The volume is—I don't even know what to say. This is astronomically high volume. This is one of the highest volumes I've ever seen, and that actually means that there's a whole lot of buyers for Nvidia options right now. It's strictly in an Nvidia option market, as well as Tesla, as well as Palantir.
Palantir has been a huge win for me, but right now we see just crazy call buying on Nvidia. So that is a little bit scary because Nvidia is likely to go up. There is a whole lot more volume actually on call options than put options. In fact, look, this 150 call option has 165,000 volume, but if I show you the one—you know, let's go to 150 on the put; it has only 8,000. Do you see what kind of skew that is? Do you guys notice that the volume literally on calls is 20 times more?
I can go to an out-of-the-money option right at 140; it's going to have more volume. I already knew that, right? Because 150 would be an in-the-money put option, which is a little bit unusual for people to buy. But even an out-of-the-money option like 140, which would be the biggest hedge right now, okay, this would be the biggest hedge. If you want to hedge, you would be well buying put options. Selling put options, buying put options, it's the same volume here.
So if someone wants to hedge their Nvidia position, they would be buying puts. But you can see here how the volume is only 29,000 versus 160,000+ on the call option. So there are a whole lot more call options, and I am bullish on Nvidia. I do think expectations are priced in, so when we do get the good earnings, the stock will go up, but it's not going to pop up like huge amounts.
Okay, I'd be happy if it does, don't get me wrong. If Nvidia goes to 160, 170, great, but that is not what I expect. The chances of that happening are very low. My base case would be about 152, 153; I could see Nvidia just being up like 5%, 6%, and you know, that would be some good money to be made.
So I would look at doing a covered call; so sell a call at 155 because I don't think it'll go to 155. I think it'll be 152, 153. We'll get a pop, but not a huge pop, right? So right here, you will basically collect $250, and hey, that's some extra money in the pocket, and that's my first strategy that I would basically do on Nvidia—just a simple covered call strategy.
The next thing that I would do is, if you want to make a longer-term play and you are bullish on AI like I am, I'm very bullish on AI, I would do a leap option on Nvidia and say, "Hey, I don't know what's going to happen during this earnings. I'm bullish; I'm with Henry. You know, he's been right. I'm bullish; I hold Nvidia." Whatever your reasoning is, but hey, I don't know what's going to happen on the 20th. I'm bullish in the long term for sure.
Then I would do something a little bit more longer-term in nature. Instead of having to predict short-term, you know, what's going to happen, I know a lot of folks that I work with are retired, and you know, we don't necessarily care about the short-term, one week. We want to get richer for sure over the next several months, several years. We want to have a positive 2025, except ET, right? So it's also about that long-term view.
Here's what I would do on a long-term view. I would go to buy a call, and I would do something like—you can go for May, you can go for a leap option. Okay, let me show you a leap option. Usually, when I do a poor man's covered call or leap or what I'm showing you right now, which is buying a longer-term call option, it's all the same thing, right? I usually do go out about nine months of expiration, but here I'll show you an option that's going to just go out 180 days.
This gives you an 180-day bet—that's very good, right? You get 180 days to see what will happen to Nvidia as the expectations continue to rise, and with a 180-day option, you basically have two earnings events. So you get this earnings and next earnings. That's really good, right? Because something that does happen—let me tell you about a new topic that I haven't covered on this channel—it's called post-earnings drift.
What post-earnings drift means is when a stock reports earnings and it's positive, and it goes up, let's say you get a momentum swing in the stock 8%, 10%, you name it, right—x% in upside—you will typically see the stock do some more drifting or some more running to that side.
Let me explain: if the stock goes up 10% over the subsequent couple of months, it may continue to go up another 5%, 10%—it typically kind of swivels up, right? It's called an earnings drift, so it drifts towards that side, right? That's actually really common; that's something that I've seen over and over again, even back when I was in college and not even really trading so much yet. I was not even fully trading, doing option trading full-time. I didn't have my Goldman Sachs time yet; I didn't work at Goldman Sachs yet.
I was just taking my basic courses and my finance degree, and they were already telling us about post-earnings drift, so that's something that has been covered a long, long time ago. But I do see it in action all the time. I see it happening in the market all the time. We've seen it with Palantir; Palantir reported good earnings, we had earnings drift, and it got included in the S&P 500. Fantastic, it went up then NASDAQ, and then you get a whole lot of earnings drift. Essentially, in Palantir's case, there were other factors, but earnings drift was definitely part of it.
So what I think will happen with Nvidia and why I'm showing you this 180-day expiration option is because if Nvidia goes to $152 per share in the next week, right after earnings, we can still see it go to 160 and 170 over the subsequent months because of earnings drift.
Okay, so I would do a leap option where I would just buy something like the 130. If I expand the 130 here, there's not a whole lot of volume—that's really good, actually. There's not a whole lot of competition for this option, and the implied volatility is actually half of what we see right now in the short term.
So if you want to kind of ignore the short-term volatility of everyone's trading Nvidia, options are expensive, especially when it comes to buying them. Okay, in the short term, I think it's smart to sell them. In the longer term, I would say that it is smarter to buy an option on Nvidia to really get in behind Nvidia and to ride the earnings drift, to ride the momentum, to ride the stock performing very well.
So you can see how the implied volatility here is just 53, which is half of what we currently have going on. I would buy the 130; this will be about $2,800, which is much better than paying $4,000 or $155,000 for Nvidia stock if you were to buy 100 shares. It's a lot better, actually, so this is a lot cheaper. It's like a very small fraction of having to own 100 shares, but the leap option gives you the same power and the same strength, and you can basically buy bicep—you know, bicep over tricep—on Nvidia without having to put up 100 shares worth of capital.
So you really get that strong upside without having to put up all that capital. I would say that this is hands down one of my top option strategies that I would use to really scale your wealth a lot faster—really getting to that retirement point. And I would just buy the 130 call option.
Okay, the bid-ask here is actually very good, a very good bid-ask spread. There's only a 30-cent difference, so fantastic. The Delta here is 68, and I've said in many of my videos that the ideal Delta for a leap option is going to be around that 7 Delta sweet spot. It gives you that good upside without becoming too expensive, so I would straight up buy this call option.
And then if you want to decrease your cost, essentially, you can sell shorter-term call options to generate some income, like a covered call, except this would be a poor man's covered call because, well, for a covered call, you need 100 shares. For the leap option here, you don't need 100 shares, so that's what makes it a really strong strategy.
So I would look, if you want to be safe, by the way, and you're like, "Hey, I don't want to risk losing my shares. I don't want this leap option to go into the money." Right? What you can do is you can go a little bit higher. Alright, so you can go for the 160 covered call here. You can see that there's good volume; the implied volatility is actually a lot lower for January. A lot lower. I thought it would be higher; I thought it would be somewhere in between 50 to 100, but it's still on that bottom end of 50.
So that's not that good, because when you're selling options, you want higher implied volatility. But nonetheless, I mean here you get $600. So if I go to sell a call, alright, you get $600, and you really get that $600 versus what you pay, which is about 3K thereabouts.
So that's about a 20% return that you can get in 60 days, which is about 10% per month. So you can get a 10% per month return on Nvidia by running this strategy, which is obviously a fantastic return. 10% per month, you will well do over 100% per year in return if a strategy like this works out in a single year, which it will for Nvidia.
I strongly believe Nvidia will be up, so this is actually one of my best plays. This is what I'm going to be opening up Monday morning in my Discord community. This is one of the positions, as well as the covered call position, and honestly, I will be selling puts as well. I will be selling puts on Nvidia.
Let me show you the several sell puts I have and then give you a new recommendation for sell puts because, look, we have 132—oh, actually, I had some options expired profitably. So currently, I only have the 132. I would actually sell 135 puts right now on Nvidia.
If you want more option strategies, more of my ideas on Nvidia, you should really check out the last Nvidia video I made and watch it in its entirety, because this week on Nvidia is the biggest opportunity that I've seen—literally! You should be taking advantage of this; you should be making money hand over fist, guys.
Right now, it is an easy time in the market. Make as much money as possible, because there are going to be times where the market is not going to be as hot. We may see a bear market, and I will make some videos on how to protect yourself and manage your risk because I really care about your overall well-being when it comes to option trading.
You want to understand how to manage your portfolio from A to Z in good and bad times. But right now, it's a good time, so get your wheelbarrow out, put all the cash you can from the market, and scale your wealth really fast.
And if you need help scaling faster, I'm more than happy to coach you one-on-one. It's the first link in the description. I'd be happy to work with you. Either way, catch you in the next video. Make sure that you check out another Nvidia video that I just recently made.