Another Chance To Crush

First up big props to Greenlander for digging up this beauty – we are much obliged! Report to the lair to claim your free month of Zero goodness (email Mole at admin@). NVDA is a great candidate for an Limping Condor (a.k.a. double diagonal) or a Double Calendar Spread (DC). This time around, we’re going to stretch out our wings on our LC a bit to widen our break even points.

Symbol: NVDA
Strategy: Limping Condor
Idea: Sell inflated pre-earnings IV.
When To Enter: Before 5/12 earnings announcement.
When To Exit: After earnings announcement OR we hold through expiration if there is little IV movement.

Strategy Details:

Trades to open position    No.    Price    Total
buy 3rd June $30.00 Put    1×100    $0.25  -$25.00
sell 13th May $33 Put    1×100    $0.33    $33.00
sell 13th May $39 Call    1×100    $0.34  $34.00
buy 3rd June $42 Call    1×100    $0.19   -$19.00
Total    $23 credit

Initial outlay: $23 (net credit)
Maximum risk: $278 at a price of $21.15 at expiry
Maximum return: $91 at a price of $39 at expiry
Break/evens at expiry: $40.30, $31.80

Considerations: We’re going to widen our break even points for this trade by using $3 wide wings.  This has the effect of raising our max risk, but once again, the max risk situation is highly improbable.  On the other hand, we are now able to collect a credit on this spread.  This strategy will perform well in the event of a ho-hum earnings result, or if we get a roughly 10% or so move in either direction (and everything in between).  Also, there’s a robust 20% spread between IV and HV here, which should compress nicely after earnings.

NVDA reports tomorrow after the market closes. So you’ve got one day to get your fill – have at it!