The Bottom Line:
- Tesla stock showing potential for a call option play, with the 50 EMA acting as strong support at $177
- Nvidia stock overbought, presenting a put option opportunity with a target in the $114-$107 range
- Blue collar option plays introduced, focusing on swing trades with a 30% stop loss and 60-100% profit target
- Market overbought, expecting a selloff to touch or come close to the 50 EMA, potentially dragging down stocks like Nvidia
- Two call options and two put options in play, with one put option on Nvidia already purchased
Tesla Stock Primed for Call Option Play with Strong Support at $177
Tesla’s 50 EMA Support Signals Potential Call Option Play
Tesla’s stock has been on a wild ride lately, with daily candles flipping everywhere. However, after a massive selloff, the stock appears to be forming a base, recovering above the 50 EMA. The RSI currently sits at 54, suggesting a favorable setup for those considering call options. The 50 EMA has been acting as a strong support level for Tesla, with the stock pushing back up each time it touches this level. As the stock continues to float sideways, a touch of the 50 EMA at $177 could present an attractive entry point for a call option play.
Monitoring Market Conditions and Tesla’s Price Action
While the decision to enter a call option on Tesla has not been made yet, it is essential to keep a close eye on the stock’s price action and overall market conditions. If the stock dips down to the 50 EMA at $177, it could be an opportune moment to consider a call option, given the historical support at this level. However, it is crucial to remain vigilant and adapt to any changes in market sentiment or unexpected events that could impact Tesla’s stock price.
Managing Risk and Potential Rewards in Option Plays
When engaging in option plays, it is essential to manage risk effectively. Setting a 30% stop loss is one strategy to limit potential losses if the trade does not go as planned. The goal is to aim for 60% to over 100% returns on these option plays, but it is important to acknowledge that not every trade will be successful. By keeping position sizes manageable and diversifying option plays across different stocks and sectors, investors can mitigate risk while still having the opportunity to capitalize on potential rewards.
Nvidia Stock Overbought: Put Option Opportunity Targeting $114-$107 Range
Nvidia Stock Overbought: Put Option Opportunity Targeting $114-$107 Range
Nvidia’s stock has been on a remarkable run, up 190% over the past year. However, the recent massive selloff suggests that the stock may be overbought. This presents an opportunity for a put option play, targeting the $114-$107 range over the next four weeks. By purchasing a put option, investors can potentially profit from the anticipated downward movement in Nvidia’s stock price.
Trusting the Trend Lines and Fibonacci Levels
The decision to buy a put option on Nvidia is based on the belief that the stock will dip down to the 50 EMA and potentially even further, into the 61.8% Fibonacci retracement level. This zone, between $114 and $107, is considered the “goldilocks zone” for taking profits on the put option. If the trend lines and Fibonacci levels hold true, investors could see significant returns on this play.
Managing Risk with Stop Losses and Position Sizing
As with any option play, it’s crucial to manage risk effectively. By implementing a 30% stop loss, investors can limit their potential losses if the trade doesn’t go as planned. Additionally, keeping the cost of each option contract between $100 and $700 helps to manage position sizing and overall risk exposure. While the potential for substantial profits exists if the trade goes as expected, it’s important to acknowledge that sudden reversals or unexpected events could lead to losses.
Introducing Blue Collar Option Plays: Swing Trades with 30% Stop Loss and 60-100% Profit Target
Introducing the Blue Collar Option Plays Strategy
The Blue Collar Option Plays strategy involves swing trades with a 30% stop loss and a 60-100% profit target. This approach aims to capitalize on short-term price movements while managing risk effectively. By setting strict rules and focusing on a few carefully selected trades, investors can potentially generate significant returns without exposing themselves to excessive risk.
Selecting High-Potential Stocks for Option Plays
To implement the Blue Collar Option Plays strategy, it’s essential to identify stocks with high potential for short-term price movements. This involves analyzing market trends, technical indicators, and company-specific news or events. By focusing on stocks with strong momentum or those that are approaching key support or resistance levels, investors can increase their chances of success.
Balancing Risk and Reward in Option Trading
Option trading can offer substantial rewards, but it also comes with inherent risks. The Blue Collar Option Plays strategy seeks to balance these factors by setting clear guidelines for position sizing, stop losses, and profit targets. By limiting each trade to a relatively small portion of the overall portfolio and adhering to strict risk management rules, investors can aim for consistent profits while minimizing the impact of any individual losses.
Market Overbought: Expecting Selloff to Touch 50 EMA, Potentially Impacting Nvidia
Market Overbought: Expecting Pullback to 50 EMA
The current market conditions suggest that the market is overbought, with the QQQ ETF experiencing a significant selloff after reaching extreme overbought levels on the RSI. Despite this selloff, the RSI remains at 61.41, indicating that there is still room for further downside. Historically, when the market experiences such a strong selloff from overbought levels, the RSI tends to dip below 50 before reversing back up. This suggests that the market may continue to pull back until it reaches the 50 EMA, which was last touched in May.
Potential Impact on Nvidia and Other Stocks
As the broader market pulls back towards the 50 EMA, it is likely to drag down several stocks along with it. Nvidia, which has experienced a remarkable run over the past year, is one stock that may be particularly vulnerable to this market correction. The recent selloff in Nvidia’s stock price suggests that it may be overbought and due for a pullback. As a result, a put option play targeting the $114-$107 range over the next four weeks could be an attractive opportunity for investors looking to profit from this potential downside move.
Managing Risk in a Volatile Market Environment
While the current market conditions may present opportunities for option plays, it is crucial to manage risk effectively in this volatile environment. By setting strict stop losses and keeping position sizes manageable, investors can limit their potential losses if the market moves against them. Additionally, diversifying option plays across different stocks and sectors can help to spread risk and potentially increase the chances of success. As always, it is essential to remain vigilant and adapt to any changes in market sentiment or unexpected events that could impact the performance of individual stocks or the broader market.
Two Call Options and Two Put Options in Play, Including Nvidia Put Option Already Purchased
Nvidia Put Option Already Purchased, Targeting Goldilocks Zone
While no action has been taken on Tesla yet, a put option has already been purchased for Nvidia. The decision to buy a put option on Nvidia stems from the belief that the stock will dip down to the 50 EMA and potentially even further, into the 61.8% Fibonacci retracement level between $114 and $107. This zone is considered the “goldilocks zone” for taking profits on the put option. If the trend lines and Fibonacci levels hold true, significant returns could be realized on this play over the next four weeks.
Balancing Risk and Reward in Blue Collar Option Plays
The Blue Collar Option Plays strategy involves swing trades with a 30% stop loss and a 60-100% profit target. By setting strict rules and focusing on a few carefully selected trades, the aim is to generate substantial returns while managing risk effectively. Each trade is limited to a relatively small portion of the overall portfolio, with the cost of each option contract ranging from $100 to $700. While the potential for significant profits exists if the trade goes as expected, it’s important to acknowledge that sudden reversals or unexpected events could lead to losses.
Market Conditions and Potential Impact on Nvidia
The current market conditions suggest that the market is overbought, with the QQQ ETF experiencing a significant selloff after reaching extreme overbought levels on the RSI. Despite this selloff, the RSI remains elevated, indicating that there is still room for further downside. As the broader market pulls back towards the 50 EMA, it is likely to drag down several stocks, including Nvidia. This potential market correction, combined with Nvidia’s recent selloff, presents an opportunity for a put option play targeting the $114-$107 range.
