Investors’ attention is back on Italian politics, with the euro weakening overnight and local stocks declining after the head of Italy’s lower house budget committee said the nation would have solved its fiscal problems with its own currency. Meanwhile, Italian 10-year bond yields hit a four-year high as European Commission President Jean-Claude Juncker sounded the alarm, saying, “We have to do everything to avoid a new Greece – this time an Italy – crisis.” Rome has until October 15 to finish its 2019 budget plan and submit it to the European Commission.
Let’s consider NVIDIA Corporation (Ticker: NVDAWealth Strength IndexNVDA is Moderately Flat and trending Up):
The VantagePoint platform recently indicated continuing upside momentum.
Using the predictive indicators embedded within the VantagePoint platform and its predictive AI technology, we will point out three significant things. We have a bullish crossover indicated by the blue predictive indicator line crossing above the black simple moving average on September 27th. We can combine that with the VantagePoint propriety neural index indicator moving from the RED to the GREEN on September 25th. This indicator measures strength and weakness for a 48-hour period, in this case, strength. The move to the GREEN position further makes the case for a potential bullish scenario. We also have the predicted high and low above yesterday’s actual high and low indicating further strength. I want to play the VP bullish indication.
If you are strictly a stock trader, simply buying NVDAWealth Strength IndexNVDA is Moderately Flat and trending Up in the $289.00 area is a prudent move. You are anticipating a move to the upside. It is always a good idea to enter a sell-stop order to mitigate potential losses. Placing that sell-stop in the $270.00 area will achieve that goal.
For active traders with a shorter investment time horizon, you can consider a setup utilizing options. Given the market conditions outlined above, taking an active, premium debit approach may be the best path to success.
Because of the reasons given above, the purchase of a debit call spread may be one way to approach this situation. You will first want to calculate your target strike. In order to do this, you will need three pieces of data: current price, expiration date and the implied volatility associated with that expiration date. For NVDAWealth Strength IndexNVDA is Moderately Flat and trending Up, that yields a targeted strike of ~$305.00. You may want to consider the NVDAWealth Strength IndexNVDA is Moderately Flat and trending Up October 19th regular monthly expiration 300/305 call spread, buying it for $1.10. The most you can lose is the premium paid and the most you can gain is the width of the wider spread less any premium paid. Max risk = $1.10 and max reward = $3.90
This means that you are getting odds of 3.55:1.
Given the trading and market environment outlined above, a trader must evaluate whether this reward/risk ratio is appropriate for his/her risk tolerance.