Sep 2021: NVDA $210 – $215Bull Call Spread | Mean Reversion Trading Using Options

Sep 2021: NVDA $210 – $215Bull Call Spread

Stock

NVDA

Trade Structure

$210-$215 Call Spread

Trade Date

9/22/2021

Price Paid

$250

Expiration Days

10/22/2021

COMING OUT OF A CORRECTION

During a correction, 2-4 weeks of trades will get absolutely wiped out, but we save so much cash with this trading method that using it strategically will save you from these events which come unannounced and without warnings. All the trades taken during the correction are looking like winners. Here is how the next few weeks look like for our trading group consisting of 1000+ traders. Read the analysis in the end on the recent trade on V (Visa) to learn how I survive corrections.

AllGreen | Mean Reversion Trading Using Options

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Trade Rationale

I have posted a very detailed trade mentioning how I handle corrections on V (Visa) yesterday. Please read that as many trades taken during that time frame have similar rationales. I haven’t traded NVDA much this year, but got a nice opportunity during this sell-off. At the time I took this trade, DI- and DI+ were both sharply changing direction. RSI never really touched oversold but was also sharply turning upwards.

NVDA_210_215_CallSpreadOpen | Mean Reversion Trading Using Options

Trade Selection Criteria

Overall market movement

Massive drop in the markets and we are nearing the end of a correction.

CHECK

No Earnings or Significant News

Earnings were announced on 8/18 and are behind us

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Bollinger Bands outside Keltner Channels

Bollinger bands are only slightly outside Keltner Channels but we are at the bottom of our trading range here.

CHECK

RSI Analysis

RSI was turning up when I took the trade. Although, It dipped again a few days later

CHECK

ADX Analysis

DI- is turning down and DI+ turning up when I put on this trade. These are rare, but amazing setups to trade.

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Trade Analysis

This is actually a pretty interesting trade. I took it to take advantage of the sell-off during this September correction. However, notice that the trade went against me for the next 20 days. But I still ended up making 94% ROI on it. This is such a beautiful aspect of debit spreads that they don't lose value over time via time decay. Many people attempt to buy naked calls during corrections in order to save their portfolio and end up losing anyway. This is a classic example of that. If you had an NVDA call instead of a spread, you would have lost almost all its value in the 20 days that the stock went against you.