Playing the NVDA Stock Split

Yesterday morning, NVIDIA Corp. (Nasdaq:NVDA) underwent a four-for-one stock split.

That means that what was one share of NVDA on Monday is now equal to four shares – giving investors three extra pieces of the pie.

Investors liked NVDA heading into the split. I mean, it’s had an incredible run over the past six months. Last quarter, impressive earnings boasting over 88% year-over-year revenue growth sent shares all the way to $835.

The main reason behind the split is to make the stock more accessible to average traders. A single share for $800-plus? Not many individual traders want to fork over that much cash.

Now, what was a $750 stock on Monday has a price tag of just $185 per share.

But it’s about to get even cheaper than that.

Here’s where NVDA’s headed post-split – and how you can play it…

Splits like this tend to indicate a top in a stock’s price. When stocks blow higher into a split, like NVDA has, a lot of that money tends to leave the stock post-split and move itself somewhere else.

There’s precedent. At the end of August last year, Apple Inc. (Nasdaq:AAPL) underwent its own four-for-one stock split, taking it from $500 per share to about $125. In the month before the split, AAPL rose 40%. But in the month after, it dropped almost 20%.

Take Tesla Inc. (Nasdaq:TSLA). The stock went up a whopping 81% between the split’s announcement and the split itself. But in the weeks following, it crashed 34%.

Now, it’s important to note that both AAPL and TSLA eventually found their footing. By the end of the year, they had both moved into positive territory.

But let’s focus on the short term. Over the next few weeks, potentially months, NVDA could take it on the chin as money reallocates itself post-split.

So, I’d recommend a short-term bearish strategy like puts to cash in on NVDA’s steep decline.

In fact, yesterday afternoon, I texted a put recommendation on NVDA to all Profit Takeover members signed up for text alerts.

If you didn’t receive my NVDA trade, then be sure to sign up for text alerts right here – and make sure you don’t miss the next one!

Mark’s Watchlist

  1. Vodafone Group Plc (Nasdaq:VOD)

There’s huge activity in this British telecom right now. Yesterday, I spotted a massive 40,000 contract call buy on the September 17 $17 calls:

I’ll be frank – I have no idea what’s going on here. I mean, this stock has been falling all year, down 14% over the past month alone. But this isn’t the only big money trade I’ve seen in VOD, and right now, we’re looking at about 200,000 open option contracts betting on this thing going higher.

It’s hard to argue with this much paper. I’ve got to piggy back this trade – and I’d do it with the October $17 calls for $0.40. That’s an extra month of time for the stock to rise for only an extra $0.15.

  1. General Motors Co. (NYSE:GM)

GM is another stock waiting to make that electric vehicle (EV) breakout. But, like Ford Motor Co. (NYSE:F), it’s stuck in a bit of a rut.

It’s down about 5% in the past month, and it’s got Thor’s hammer on the selling. But we might have found a spot where it’s worth pecking, with shares near a six-month low right now.

But there’s a problem with going long. If the market turns around and starts dropping – a move that’s certainly in the cards, especially with the VIX light on yellow – GM could absolutely tank.

Instead of trying to pick a bottom, I like buying GM when it’s back above $55 per share and on its way to $60.

Folks, trying to pick a bottom can lead you to be stuck in a position for a long, long time. If you buy on the way up, then you can potentially make a quick couple of bucks as the stock makes that long momentum move.

  1. Energy Select Sector SPDR Fund (NYSEARCA:XLE)

XLE is up 5% since Monday’s open, the last time this ETF was on my Watchlist. And I’m still bullish on the energy sector, with Brent crude and WTI both trading higher this morning.

  1. Apple Inc. (Nasdaq:AAPL)

I spent a good deal of time during yesterday’s Profit Takeover live event talking about AAPL – you can catch a replay right here.

Specifically, we talked about our AAPL July 30 $148 put – the one that I texted out on Wednesday – and the one that we banked a 132% profit on by Monday.

But I don’t think the money-making opportunity is over in AAPL. I’m still watching this stock as we head into its earnings report next week.

Now, I’ve got to say – AAPL has been running higher and higher this past month, up nearly 10% over the past 30 days. And I’m not sure any earnings report, no matter how positive, can maintain that rally.

Today’s Impact Money Trade

Today, we’re looking at a big-money trade on my favorite indicator: the VIX.

Someone bought the October 20 $17 put and $50 call strangle. Essentially, they’re trying to finance a call hedge with long puts, and to do so they purchased a total of 139,872 contracts on the VIX.

The call side of this trade is a hedge, which is “business as usual” when you’re an institutional trader. It’s a way to protect yourself against a potential VIX spike. But this trader thinks the VIX is going to decline in the short term – that’s what the $17 puts are for, which have a strike much closer to the VIX’s current level.

And I’m inclined to agree with this trader’s outlook – just check out today’s VIX light…

VIX Traffic Light

Our light is still yellow today – but we’re heading towards red yet again.

Right now, the VIX futures curve is flipping back into a contango. That said, it’s still moving – so it’s not enough yet to officially turn the VIX light red.

So for now, we’re maintaining that yellow light. But by tomorrow, I wouldn’t be surprised to see a red light on the screen.

Until then,

Mark Sebastian


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