Today’s MRKT Call is Presented by Fidelity
Today at 1 pm, Guy Adami and Dan Nathan will go live on YouTube to discuss:
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Nvidia Protection Play into Earnings
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Stock Replacement Strategy
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Strategists Upping S&P Targets
If you enjoyed this episode, make sure to subscribe to the Risk Reversal YouTube Channel:
SHOW NOTES:
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Nvidia Collar vs. 100 Shares ~$945
Buy May 24th Weekly 1020/880 Collar for No Cost
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Sell to open 1 May 24th weekly 1020 call at ~$14.50
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Buy to open 1 May 24th weekly 880 put for ~$14.50
Break-Even on May 24th Close (Friday):
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Profits of up to 75 between 945 and 1020 with max gain at 1020, Stock called away at 1020. up ~8%
Losses of up to 65 between 945 and 880 but protected below 880, down about 7%
Hedge Rationale:
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A long-holder would do this if they were more concerned with the downside of post-earnings than the upside. The hedge benefits from skew to the calls, offering $75 of upside vs only $65 of downside for no cost.
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Freeport-McMoRan (FCX) ~$945
Buy July 55 – 60 call spread for ~$1.70
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Buy to open 1 July 55 call for $2.95
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Sell to open 1 July 60 call at ~1.25 cents
Break-even on July expiration:
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Profits of up to 3.30 between 56.70 and 60, max gain above 60
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Losses of up to 1.70 between 56.70 and 55 with max loss below 55
Trade Rationale and Management:
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This trade idea risks about 3% of the stock price and has a break-even up of 5%. Again, this makes sense for longs who want to define their risk from here and play for a new all-time high in the coming months.
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