Below is a daily chart of NVIDIA Corporation (NVDA), $163.58.
Trade: Consider shorting Jul (7/14) $167.5 naked calls (1 DTE) for around $.54/share (mid-point $.57). NOTE: Day traders can also short stock based on hourly climactic if like.
Technical Setup: Climactic Sell Setup and Topping Tail at Major Resistance.
Option Strategy: Short Naked Calls (SC). Similar to bear call spread except not buying the higher strike call. We sell call strike price above resistance where the pattern suggests that the stock will not close above at expiry. In exchange for the premium received, call seller has the obligation to sell the underlying stock at the strike price on or before expiry.
The Max Gain is the Premium received, which is realized if the stock closes below the short call strike at expiration. The return on investment (ROI) is the credit received divided by the margin required to hold the position. The break-even is the short strike plus credit received (i.e., also your cost basis if required to short the stock).
Considered a mildly bearish strategy since we are not buying puts or shorting stock and just calling a short-term top in the pattern. Trade has positive theta (meaning you make money on time decay) making it a high probability trade since we time entry with the technical pattern.
Max Gain on Call Spread: Credit received. Cost basis if assigned is lower strike plus Credit.
Stop Loss: $166.42.
Happy trading! If you have any questions or comments, please e-mail Greg Capra at Greg@mastertrader.com or Dan Gibby at Dan@mastertrader.com
All the best,
Greg Capra
Managing Director and Pristine Founder
Dan Gibby
Chief Options Strategist
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