At 9:30 A.M. ET on August 27, I alerted my NVDA trade.
The company had just announced earnings the evening before, and the stock gapped up toward all-time highs.
Anyone who followed my alert banked…
You can reuse this pattern. We see it over and over again.
The strongest trade setups follow specific patterns. Patterns that give us the best chance of success.
And sometimes, the simplest setups work the best.
Like my trade on NVDA…
NVDA Earnings
Revenue came in at $96.2 billion, up 18% from last quarter (more than double what it was a year ago). The company’s data center business is responsible for $89.0 billion of that, which is up 117% year over year.
Operating income hit $63.7 billion, a 124% jump. And gross margins expanded to 75%. At the scale of NVDA’s business, that shouldn’t be possible.
But here’s the part that actually moved the stock:
Management is calling for $108 billion next quarter. That’s another $12 billion sequential jump. And they’re assuming zero data center revenue from China.
No China and still triple-digit growth…
They also lined up financing platforms with Apollo, BlackRock, Blackstone, Brookfield, Goldman Sachs and KKR to mobilize over $500 billion of third-party capital for AI infrastructure. NVDA is building the plumbing for its own demand.
The one wrinkle: accounts receivable ballooned to $63.1 billion from $38.5 billion at year-end. Plus, inventories climbed to $31.6 billion while free cash flow dropped to $21.3 billion from $48.6 billion last quarter.
Bears will hammer those negatives. But the bull answer is simple: you can’t ship $89 billion of data center products without financing the ramp. And NVDA knows this. That’s why it’s building the infrastructure itself.
Bottom line: the fundamentals came in hot, the guidance came in even hotter, and the stock gapped toward all-time highs.
My Trade
This was a classic breakout trade setup.
When I woke up on August 27, NVDA had already spiked during pre-market hours. That was our breakout level if the stock stayed bullish intraday, the pre-market highs: $226.50.
Here’s the alert I sent to traders at 9:30 A.M. ET:
NVDA Sept. 4 $230 calls over $226.50.
The stock tagged the breakout level once around 11 A.M., then hit it again after a momentary pullback.
There were multiple opportunities to enter this stock before the breakout to new intraday highs.
Take a look:
With short-dated options contracts, everyone should have taken sizable gains on the way up.
We don’t need to hold for multiple days to get a good return. The short expiration date ensures our position moves exponentially compared to the actual price of the stock.
That’s the linchpin that all of my patterns rely on… short-dated contracts that leverage the underlying percent change of the asset.
And unlike using regular leverage, my risk is capped at a small percentage of the money I put in: my risk level.
If you missed this breakout, there will be more.
But don’t wait for my trade alert…
Learn my entire trade strategy on September 15 & 16.
- Every pattern.
- My rules for risk management.
- And when to take gains.
Your goal should be self-sufficient trading.
Be good (and be good to others),
Ben Sturgill
*Past performance does not indicate future results. Not typical.
