Hey 5-Star Trader,
“Tuesday Trade” Journal: One of the most important concepts in trading is to review your work, and learn from the good and the bad. Identifying what is working is critical — to do more of it. So, to lead by example, each Tuesday, you’ll get a trade from my trading journal, in which I explain my thought process from start to finish. Trading is all about finding something that works, and applying it over and over again. That’s how you find trading success. So study up on this “Tuesday Trade” and let’s get to work.
For this week’s “Tuesday Trade,” I want to outline my trade in Nvidia (NVDA).
News of the NVDA stock split came out in the early part of June which sent its price soaring. This got me interested and I started to do some research.
The first thing I did was run Apple (APPL) and Tesla (TSLA) through my Hot Zone indicator. Both companies had recently gone through a stock split of their own so I was trying to get an idea of how NVDA may act while undergoing the same process.
Pictured below is AAPL into its split. This shows that AAPL was extended but still traded higher into the following three weeks.
Below is a picture of TSLA during its split. This was also trading higher into the split and it almost doubled!
Seeing that NVDA had just broken $700 (pictured below), I decided to buy a butterfly targeting $750 ― BUY +1 BUTTERFLY NVDA 100 18 JUN 21 700/750/800 CALL @10.96 limit order (LMT).
This was super aggressive and risky, however, I was anticipating a similar pattern to APPL and TSLA when these stocks split. I also took on the full risk because if I was wrong, the whole contract would decay and lose value since it’s at the money (ATM).
A few days into the trade and NVDA was stuck at $700, but it had a 30-minute squeeze and 78-minute squeeze so I held onto it. Finally, after a few more days, it finally broke above the $700 price point.
Now that the $700 barrier was broken I was feeling better about this trade. Because NVDA was a split trade, I knew the news would likely pick up coverage on stock as we got closer to the deadline for people to own the shares which was (6/21). Until then I was holding and watching for the momentum to (ideally) hold up.
By now it was June 14 and I had been holding NVDA for about 10 days. The Federal Open Market Committee (FOMC) was about to start its two-day meeting and tensions were high. The S&P 500 was at the new all-time high and the Nasdaq was hovering just below an all-time high. I could see a possible catalyst for a pullback so even though my NDVA trade was going well, I was watching it very closely, ready to take profits if the setup turned.
Two days later I finally decided to exit my trade ― SELL -1 BUTTERFLY NVDA 100 18 JUN 21 700/750/800 CALL @16.00 LMT. This is about a 50% win. Of course, I would like more upside, but after the FOMC news I didn’t feel like holding it another day to see if a higher move was a possibility.
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