Tony Zhang suggested on CNBC's "Options Action" a bullish options strategy in NVIDIA Corporation (NASDAQ: NVDA) ahead of the earnings report, which is scheduled for August 19.
Zhang said that he is going to pay special attention to guidance in this earnings report. He explained that the company is driven primarily by two segments: gaming and cloud computing.
He expects to see strong guidance for the gaming segment because of the release of new XBOX and PS5, which usually triggers PC gamers to upgrade their tech.
NVIDIA has a 75% market share in the PC gaming and it is going to offset some of the softness that is going to come out of the cloud computing segment, said Zhang.
Zhang wants to use options to make a bullish bet. He wants to sell the September $450 put for $22.60 and buy the September $415 put for $10.60. With the trade, Zhang is collecting a premium of $12, which is his maximal profit.
His maximal loss is $23 and it is going to happen if the stock closes at $415 or lower at the September expiration. The breakeven for the trade is at $438.
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August 15, 2020 at 08:51PM
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