Option Trade 
NVIDIA Corporation (NASDAQ:NVDA) Calls
Monday, August 07, 2017

** OPTION TRADE: Buy the NVDA SEPT 15 2017 175.000 CALL at approximately $7.40. Place a pre-determined sell at $15.00.

Note: No protective stop losses added -- but if you wish to do so make it $3.00.

Also Note: This is a recommendation and individual members can use their own discretion as to when to enter or exit!

You may also wish to read Stock Options Made Easy Trading Philosophy

by Ian Harvey   

The maker of graphics and high-performance computing chips NVIDIA Corporation (NASDAQ:NVDA) is scheduled to report Q2 results, for the fiscal Quarter ending July 2017, after the market closes on Thursday. Analysts expect the Santa Clara, Calif.-based company to earn 69 cents a share, up 75% year over year, on sales of $1.96 billion, which is up 37%. Meanwhile, the so-called Whisper number is $0.76.

Nvidia is best known for its graphics processors for personal computers and video game consoles. But it has a growing business in providing high-performance processors for data centers, artificial intelligence, machine learning and self-driving cars.

Shares, which have jumped 61.15% this year, broke out in May and are well above buy range near record highs; in comparison to the 9.73% growth of the S&P 500. NVIDIA has just touched a record high of $170.07, bringing its 12-month advance to an astonishing 194%.

Nvidia has been crowned the smartest company in the world by MIT, and it has carved itself out a major chunk of the self-driving, data center and AI world.

The stock is prone to big moves after reporting earnings and can easily gap up if the numbers are strong.

Data suggests options traders are expecting another major move from NVDA shares. Specifically, the options market is currently pricing in a 9.6% swing for the semiconductor stock for Friday.

This isn't exactly surprising, though, given Nvidia's history of making big moves in the session after earnings. In fact, the stock has made a single-day, double-digit percentage moves in five of the past eight quarters, including a gain of 17.8% last quarter, and nearly 30% last November.

NVIDIA Corporation’s 50 day moving average is $156.80 and its 200 day moving average is $124.22. NVIDIA Corporation has a 1-year low of $55.66 and a 1-year high of $170.07. The stock has a market cap of $99.49 billion, a PE ratio of 56.13 and a beta of 1.24.

Influencing Factors

Nvidia does one thing really well. The company builds graphics processing units or GPUs. GPUs began their life as a way to increase the speed and quality of video game graphics. Rendering the large number of shapes required for today's video games requires lots of processing power which GPUs are good at handling. Solving multiple problems at once in the fashion of GPUs has been called "parallel processing."

Parallel processing is the next big wave of computing and powers things like artificial intelligence. Nvidia is well placed to be a major player in the new business.

Founder and CEO Jensen Huang cited a nearly threefold increase in NVIDIA's data-center graphics processing unit (GPU) sales last quarter as a primary driver of those impressive results.

As Huang put it, "One industry after another is awakening to the power of GPU deep learning and AI, the most important technology force of our time." In a market expected to grow nearly 60% this year generating $12.5 billion in revenue, and more than $46 billion in just three years, NVIDIA's AI leadership position is right on target.

Nvidia announced its new "Volta" architecture - the newest, Volta generation of GPU claims 12 times faster processing than its previous "Pascal" architecture.

The Volta product is initially built to be installed in data centers. Artificial intelligence research is primarily done on large data centers, and Nvidia's chips are the heart and soul of those data centers.

Artificial intelligence is the technology powering advances in self-driving cars, personal assistants, image recognition and so much more. Faster chips can speed up research which brings AI advances to market faster.

Perhaps the biggest driver for NVDA stock is the market for self-driving vehicles. The company's platform, called Drive PX 2, has been gaining significant traction. The key is that the technology is able to process a huge number of images with a high degree of accuracy.

Customers include Volvo AB (ADR) (OTCMKTS: VOLVY), Daimler AG's (OTCMKTS: DDAIF ) Mercedes-Benz, AUDI AG NPV (OTCMKTS: AUDVF ), Toyota Motor Corp (ADR) (NYSE: TM ) and Tesla. According to NVDA's own estimates, the market opportunity is forecasted to hit about $8 billion by 2025.

When it comes to execution, NVDA stock is near flawless. Time after time, the company finds ways to keep up the growth ramp — and to impress Wall Street.

Consider the latest earnings report. Total revenues shot up by 48% to $1.94 billion and GAAP earnings per share of Nvidia stock soared by 126% to $0.79. Basically, all parts of the business showed tremendous momentum.

The company has also been shareholder friendly. For fiscal 2018, about $1.25 billion is expected to be returned to shareholders through dividends and share repurchases.

Finally, it looks like the growth momentum will not let up anytime soon. Note that SunTrust Robinson Humphrey analyst William Stein recently upgraded NVDA stock with a $177 price target, saying that “there are still aspects of the company we think are under-appreciated.”

Analysts and Hedge Funds Opinions

Mitch Steves, an analyst at RBC, said: "If it's Intel, Nvidia and AMD and you ask me to choose one, it's going to be Nvidia by a country mile. Essentially, their product is the best."

Gregory R. Lai, Principal, Affinity Investment Advisors, said, "Nvidia should continue with strong earnings report, possibly beating by a little."

Amy Thomas, Managing Director at FindLeadingStocks.com believes the stock is heading higher and said, "Nvidia has been a huge winner for us over the past few years. There's no question it is a big leading stock and its latest consolidation is yet another solid buying opportunity."

Bank of America Corporation reissued their buy rating on shares of NVIDIA Corporation in a report issued on Thursday, July 6th. They currently have a $185.00 price objective on the computer hardware maker’s stock.

Several other analysts have also recently commented on the company…..

  • Royal Bank Of Canada reiterated an “outperform” rating and issued a $175.00 price objective on shares of NVIDIA Corporation in a research report on Thursday, July 13th.
  • Mizuho restated a buy rating and issued a $170.00 target price (up previously from $145.00) on shares of NVIDIA Corporation in a report on Wednesday, June 28th.
  • Zacks Investment Research upgraded NVIDIA Corporation from a “sell” rating to a “hold” rating in a research report on Monday, May 8th.
  • Goldman Sachs Group, Inc. (The) reissued a “buy” rating and set a $165.00 target price (up from $130.00) on shares of NVIDIA Corporation in a research note on Monday, May 15th.
  • BidaskClub upgraded shares of NVIDIA Corporation from a “hold” rating to a “buy” rating in a research report on Tuesday, July 11th.
  • Finally, Canaccord Genuity restated a “buy” rating and set a $180.00 price target (up previously from $155.00) on shares of NVIDIA Corporation in a research report on Monday, July 24th.

Six investment analysts have rated the stock with a sell rating, twelve have assigned a hold rating, twenty have given a buy rating and three have assigned a strong buy rating to the company’s stock.

Also, Cypress Capital Management LLC WY boosted its stake in shares of NVIDIA Corporation by 27.4% during the second quarter. The firm owned 21,520 shares of the computer hardware maker’s stock after buying an additional 4,623 shares during the period. Cypress Capital Management LLC WY’s holdings in NVIDIA Corporation were worth $3,111,000 at the end of the most recent reporting period.

As well, Grimes & Company Inc. bought a new stake in shares of NVIDIA Corporation during the second quarter. The institutional investor bought 1,600 shares of the computer hardware maker’s stock, valued at approximately $231,000.

Harvey’s Options Volatility Indicator


Despite NVIDIA's jaw-dropping first quarter, in which revenue soared 48% to $1.94 billion and earnings per share (EPS) more than doubled to $0.79 from last year's $0.35, the best is still to come.

Therefore, based on the facts above, and Harvey’s Options Volatility Indicator, the following option trade is recommended…..


** OPTION TRADE: Buy the NVDA SEPT 15 2017 175.000 CALL at approximately $7.40. Place a pre-determined sell at $15.00.

Note: No protective stop losses added -- but if you wish to do so make it $3.00.


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