The market was bearish yesterday as most every stock was down-trending. Trading the NVDA option chain on the call side was the winner today though as it was bullish with major grit. No other stock within the S&P 500 had momentum like Nvidia did today.
NVDA Call Options: 143 Call
The chart above shows NVDA call options 143 strike (expiring Friday Jan 3, 2025), now let’s dive into the ways to trade this weekly option on it’s expiration day. Just like we did with the Apple options stock. Trading an option on the day it expires is exciting, rewarding, and stressful due to it’s theta decay risk. So, this trade is treated the same as 0dte options on SPY or QQQ.
- News: Bank of America has reiterated its buy rating on Nvidia with a $190 price target.
Trading NVDA stock options is great on it’s expiration day. The stock’s option prices are less expensive and you can grab strike’s under 1.00 near the money. Nvidia options have a strong amount of open interest and volume in many of their strike prices all week. But, on expiration day it can be the most volatile with strong price swings.
- Example: If this was weekly option day traded on a Monday, the best would be a 1x or 100% gain. If this was bought on Monday and held through expiration on Friday the price would most likely be much lower on Friday providing a loss. That’s how options work, as theta decay is in full effect. That is also when you can find opportunities to day trade these when the strike prices are lower.
Entry Point:
From the option chain Nvda chart above, a good entry point would have been at the .35 price right around the 6:35 am (pst) mark right out of the gate as the chart indicators were pointing to the upside. NVDA then continued to slowly climb upwards until the end of the day. An opportunity for puts where no where to be found, all the open interest and volume was on the call side today.
Exit Point:
The best overall exit point would’ve been around the 1.55 mark at 7:00 am (pst) deep in the money (ITM). The chart indicators (MACD, bollinger bands, RSI, CCI) on NVDA were showing signs of a reverse was about to happen. The chart below shows the NVDA morning pop as the market opened. Negative divergences were starting to show on the RSI and MACD which meant a reversal was about to happen indicating a good exit point for any calls being held.
This 0dte style of trading Nvidia options (CALL) scenario represents a 4.2x, meaning a 420% profit could be made from this quick 25-minute trade. As the day continued, it transformed into a weak bullish scenario. The NVDA put options today did not see any any action at all. The only real opportunity for Nvidia puts were at the last 15 minutes of the trading day. Risk was very high, but it was there.
Profit Example:
- 100 contracts bought at .35 ($3,500 investment)
- 100 contracts sold at 1.55 ($15,500)
- Minus $3,500 investment = ($12,000)
- Minus 100 contracts cost at .65 ea ($65 on ThinkorSwim)
- Total Profit: $11,935
Key Takeaways:
- Watch the main chart on NVDA, and their option strike price simultaneously, make adjustments or change option strike prices when needed. Keep them in a watch-list.
- Technical indicators on the Nvidia (NVDA) chart supersede when trading their option from their main chart like above. (same thing for other stock symbols)
- Keep on eye on Level 2 (Bookmap heatmap shows the buyers and sellers) signaling strong demand on the buy/sell side (try to stay under 200 as higher = slower fill rate).
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- Take note of the indicators on the chart above, it looks bearish after 7am but as you can see NVDA continues to go higher. Why? Sometimes the indicators “indicate” the stock is gearing up for another bull run while pushing the indicators lower to give it room to run. It’s an overall picture to take into consideration when day trading.
Conclusion:
NVDA shined today and the rest of the market was “meh”. The 5-minute, 15-minute, and 1-hour chart time frames shows the “checklist” scenario with the 1-minute giving key insights for fast in/out scalping. Since Nvidia (NVDA) is part of the SPY (holding 6.65%) there is still that gap open on the SPY at 576.74 (from November 6th, after the Presidential election). It’s possible more downside is coming to close that gap on the SPY.
- These types of day trading options on Nvidia stock can happen almost every Friday when their weekly option expires. Remember, when day trading options the risk/reward is very high. Many opportunities to trade options on expiration day as they have high volatility, liquidity, and open interest. Please understand the risks involved.
If you miss it today, ya might catch it tomorrow…
