Trading Nvidia Earnings: Options Strategies for Success | Buy Hold Sell with Danielle Shay

[00:00:06] All eyes in the investment world right now are not on Wall Street. They are on Santa Clara, California home of Nvidia who is reporting earnings tomorrow after the bell and everyone wants to know

[00:00:18] What are they going to say our guest today is gonna be able to answer that and then some Welcome everyone to Buy Hold Sell I am your trader Todd Schoenberger and I am joined by my friend and co-host Toven Smith out at sunny and hot Scottsdale, Arizona

[00:00:33] Who is I got a best off you're also the host of the money Mavericks show that's coming out Everybody's on the edge of their seat Toby for this one. I I get that all the time Todd. Thank you so much Absolutely

[00:00:45] Why no someone who was actually probably gonna be a feature guest on money Mavericks and that's our guest today Danielle Shay is coming back to buy hold sell Danielle welcome back to the program

[00:00:57] Thanks so much for having me. I'm looking forward to doing the show with you guys again Absolutely, well, we're thrilled and we're honored as well because we know how busy you are right now

[00:01:05] Because you are a trader an expert trader your your VP of options over at simpler trading But you're probably trading this Nvidia stock which was down over four percent today going into the earnings day

[00:01:18] What do you make of it? How do you play this stock right now? So when you look at Nvidia I think it makes sense that it's trading lower

[00:01:24] You know, you have a lot of people that have made a lot of money in this stock going into the earnings report And they want to take profits So you've been seeing some stocks like Palo Alto right now is down big after

[00:01:36] After the earnings report and so I think it makes sense. You know if you made a lot of money in Nvidia I gotta make sure that you take some profits, especially if those are like shorter term profits before the report

[00:01:46] But I think with this one, you know, we got to be careful because I think the hype is huge And if you look at last quarter last quarter, it had a pretty muted move after the report it gap down

[00:02:00] 0.2% it was pretty flat and then it traded lower after That was coming after three quarters in a row where you had big gaps higher the quarter before that 6% Quarter before that 26% quarter before that 12%

[00:02:14] So I feel like it might be slowing down a bit and I feel like even though I love the stock long term The hype may be a little bit too much. We may see a pullback on this one

[00:02:27] Hey, Danielle, let me ask you a sort of insight baseball question because you're an expert in options One of the things I've been trying to share with our subscribers is that in a case-like Nvidia where literally it goes straight up You know $100

[00:02:39] SMCI was even, you know crazier that my option friends were saying that you got to understand if I'm creating a call option Let's say for SMCI or Nvidia and I sell that to you then the option

[00:02:51] Money maker or market maker I should say has to hedge themselves or her cell and and then but it comes a self-fulfilling Prophecy where that they they had to buy Shares to hedge themselves in case, you know, the thing went crazy

[00:03:06] But then when it goes crazier, they have to buy more. Can you explain a little bit how the option? You know marker essentially sensuates this craziness that we seem like in SMCI Yeah, you know We see a lot of craziness like that in the options market

[00:03:18] And that's why I like to trade these key psychological values because with all of that going on in the background You can use those key psychological values and you can look at high open interest targets because oftentimes the market will go to those zones and so

[00:03:33] Just sort of a magnet right it sort of sucks them up to that point Yeah, and so it's a lot of craziness in the background and the main thing that I like to do is I like to go in and I like to look at the options chain

[00:03:46] And I like to identify where you have these high open interest targets where you have a lot of trading going on at those strikes And I like to align that with Um your key psychological values and your expected moves. So for example

[00:04:02] With nvidia right now you're trading right around 700 dollars right six 94 okay You have an expected move of about 70 dollars So if you go into the options chain in nvidia and you say, you know, I want to make um

[00:04:19] I want to make an options trade because I know that there's a bunch of hedging going on And I know the market makers are selling options and you have you know all this

[00:04:27] You know, what if nvidia does crater like what would be a price point where I could say, you know, maybe I could place an options trade around that If we moved let's say the expected move let's say like one and a half times the expected move

[00:04:41] Okay, that would bring you right down to around 600 dollars a share. Okay And if you look at your options chain You're gonna see that you have a ton of volume and a ton of open interest in that 600 dollar strike

[00:04:58] And so oftentimes what I'll do because of all of that is I'll place the lotto trade I can place a butterfly targeting that zone. I can place a debit spread I generally like to use butterflies because they're the cheapest

[00:05:11] But I mean you can pay less than 500 dollars a contract to place the lotto trade, you know In case nvidia falls into the 600 dollar strike. Yeah, I mean ii think it's important people understand that

[00:05:23] There's sophisticated options traders like daniel at back there that are not just buying a call option You know in and of itself That that you when you say the psychological lever are you talking about the round numbers?

[00:05:38] Are you talking about the 50 day support is that type of yes? I'm talking about the big round numbers So, you know with nvidia 600 650 700 those would be pretty good magnet price points. You can also use You know 25 like 625 675

[00:05:56] But I like to start with just those big round numbers and then I like to overlap that with where we have the most open interest So I mean if you look at nvidia for example

[00:06:08] Um in this 600 strike there's 14 000 contracts if you're looking at volume if you look at 625 There is only 2500 contracts So that tells me that the 600 strike has a lot more of that market maker action there Which can be more of a magnet

[00:06:27] Well, I thought I was also going to say that I mean if there's not the purest definition of of being priced for perfection NVIDIA is the poster child as much as smci was as well

[00:06:39] Well, we try to tell our subscribers particularly on smci because nvidia, you know, it's sort of going like this SMCI want it straight up. I want it $100 a day for three days in a row that that does not happen

[00:06:50] Okay, ladies and gentlemen, that does not happen those that is forced buying That means people who had sold it short had to buy back because they're getting a telephone call Dear mr. Smith, would you deposit another 150 000 in your margin account because you're upside down?

[00:07:06] Otherwise, I'm going to cash you out tomorrow. What would you like to do? So, I mean when when you're playing in that game, man, you gotta you got to understand That's why on smci and someone at nvidia as well

[00:07:17] When we went from the 73 dollar enterprise we had an smc at $450 in you know, essentially three months You know, we suggested and certainly in our manager camps. We actually got our 73 dollars back first

[00:07:30] Then we let those run when we got another 150 to 250 dollars a profit on top of a zero cost basis Sharkingly, we took more profit And if you're lucky enough or fortunate enough to stumble into one of these trades then for pete's sake

[00:07:46] Don't just sit there and you know, move. What do I do? You need to take get your take your risk off That's what that's what a experienced trader does is we take risk off and forget about the taxes I mean

[00:07:59] You're gonna have some losses trust me that you'll be able to write off against those games, but This was just like i've shown time. There's just like jdus uniface in 1999 You know went from 85 dollars to 795 dollars

[00:08:12] I remember I was at a money show giving a speech and I was going to people like all right spirits of jdus uniface Speak on you've got to sell some okay? You're in a trance

[00:08:22] And people are locked up and it just simply take your original capital out then two times your capital out Three times your capital out and yeah, then you can let it ride because you're already sitting on three times your money in In an smc ice case in 40 days

[00:08:37] That does not happen. That was a function of option people getting margin calls that they had to buy it They weren't natural buyers what i'm trying to say they were forced buyers and there's a big difference

[00:08:49] Okay, okay, so danielle toby sent me some notes on this and he was going breaking down the numbers Showing what nvidia made fourth quarter of of 2022 and then what they're expected to do this year Or when their earnings report that comes out tomorrow

[00:09:05] You're talking about your strategy in the event that the stock drops What about it going up? What about a big beat here? Do you have any numbers? I mean i'm not gonna I know you can't put out it's going to rise x amount of percent

[00:09:18] But are there thresholds that would have it even going even higher than that if we reach certain points? Oh, definitely. So something i've been doing a lot surrounding earnings season Especially with these big stocks that can have big moves is i mean i i'll trade it both ways

[00:09:32] So i mean i can place essentially an out-of-the-money Butterfly in the options market at the upside target And then i can also place one at the downside target And you know if you can get them cheap enough and if you can get your risk to reward

[00:09:47] You know risking one to make five or risking one to make ten Then you know, you're gonna lose money on one of them obviously but ideally You know not both of them so for something like nvidia if i placed for example a butterfly a put fly at 600

[00:10:03] I could also place a bullish fly up at 800 and then you know one of them It's not gonna work But if you look at the price targets, I mean you just do the same thing right so it's trading right around 700 dollars a share

[00:10:16] You have those big round numbers one of them is going to be 750 That's right where the previous high was the previous high was at 746 So sometimes i'll look at this and i'll say, you know, maybe i want to place

[00:10:29] Uh more of a conservative trade that is what i would call at the easy target to the upside The easy target is just a return to the previous high, you know, you're not looking for anything crazy You're just looking for

[00:10:44] A return back up into that zone. So I could place something, you know, moderately bullish targeting 750 But for something like a blowout, I mean it's got to be up at 800 and if I go to my options chain

[00:10:57] And I look at nvidia and I say all right, you know, it has a 76 dollar expected move Let's say it moves a little bit more than expected, you know What does my volume look like in that 800 strike just for comparison sake at the 790 strike

[00:11:13] We only have 2400 contracts. Okay, but if you go up to the 800 strike you have 28,000 So I mean for me I people, you know Option traders that are newer they'll look at earnings and options and they'll say well, there's no way you can know

[00:11:33] Which way it's gonna go and like yeah, you know, of course, you can never know exactly which way it's gonna go But you can definitely Look at, you know, these options contracts and say, you know, I like nvidia. It's a good stock

[00:11:45] I think there's a decent chance it'll go up to 800 and I also think that if it gets creamed It could go to 600 so why not let's just trade these both ways Place the upside target here downside target here

[00:11:57] And who cares which direction it goes obviously it's for your stock, but for your overnight earnings trades You can trade it both ways. Well, I you know In video today the type of sort of la la land they lost 78 billion dollars of market cap now for 5000 other stocks

[00:12:15] That would mean they were bankrupt. They're out of business for nvidia was down 5% right? So I mean we're in the law of incomprehensible Numbers is what I sort of call it which is it's it is too hard to comprehend

[00:12:29] But quickly tell us what a butterfly trade is for for us to billion so, you know, most people are familiar with The idea of coming and just buying a call or buying a put right? And that's the most simplistic way of getting into the market

[00:12:45] Well, the problem with that is that when you're just buying a call or just buying a put It's going to be really expensive and you're also going to have to deal with a volatility crush that will occur over an earnings report So an options trading

[00:13:00] You know the volatility is going to go up going into the earnings report and it's going to go down afterwards So what I like to do is instead of, you know, paying a lot of money for just a put or just a call

[00:13:11] I like to bring my cost basis down By placing a spread trade instead the butterfly is going to create a spread where for example If you are doing a put butterfly

[00:13:24] You're going to buy a put and then you're going to sell some puts at a lower strike lower price Going to be at my price target. I'm usually going to sell those at the price target

[00:13:33] So if the price target is 600, I would sell them at 600 and then I would buy some lower put For protection. So what that does is it creates, you know, a multi leg option strategy That is much much cheaper than just buying a put by itself

[00:13:52] And it creates a bullseye. It creates a range where you're long here You're short here and you're long here and this is the moment and this is the area of opportunity where you can profit And so you bring your cost basis down

[00:14:06] You're also able to take advantage of volatility crush because you have options that you've sold there as well That can ideally benefit from the volatility crush But the main thing is, you know, you're just creating a range. You're getting a cheaper cost

[00:14:23] And you have a way that you can trade a range bound move over an earnings report Yeah, but I mean it's it's not that complicated really, but it really sounds complicated if you never have never done it before for sure

[00:14:37] But I but I go back to you know, in video eight billion dollars of sales In the q4 of two years before then to 22 billion dollars of sales In in nine months or essentially 12 months later now we're at the price evaluation where if they

[00:14:56] Have to beat the number to make a difference I mean they really need to crush the number at this valuation And the odds of that we all know it's going to be double or triple what it was the year before because this didn't really get going till

[00:15:08] Microsoft, you know, put 10 billion dollars in open ai in uh in march Again, I just say if you own nvidia and you go into this print tomorrow and you haven't at least taken your original

[00:15:20] Capital out then you're gambling white white people, you know, you want to play with the house money You don't want to play with your body and I would if you're like us we've taken money out We've gotten a hundred percent back. We got 200 percent back

[00:15:32] And we probably sold some today simply because It's just risk management and just sit there and begin and have 200 You know percent go up into thin air in about five microseconds, which was somebody who was long You know pan w today

[00:15:49] Palo Alto network, you know, they just lost their their options under the they just lost 14 percent or 20 actually 18 percent of the value Yeah, do that Todd. That's all I'm trying to say. No, it's great. It's great stuff

[00:16:02] Actually, but if we do need to end it on this block though guys because there's so much excitement Surrounding nvidia we could probably talk the entire show about it But there'll be more to come obviously when the company does report earnings after the bell tomorrow

[00:16:16] So you definitely want to check in with your uh with your favorite financial station Which is obviously by ho cell and biz talk today tv that's going to obviously have um I thought we were gonna start an nvidia channel. What the hell? I thought

[00:16:31] We probably said it's a great idea. We'll bring it up at the next board meeting But with us today, we have daniel shea She is the vp of options and simpler trading and our resident options experts

[00:16:45] So we're so happy that she's with us today, but we have so much more to talk about So please stay with us. We'll be right back after the break By hold sell brought to you by cross check management

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[00:17:57] This is barbara duran from vd8 capital partners and you are listening to todd and toby on buy hold sell Welcome back to buy hold sell well so much excitement has taken place one Because of the president's day holiday

[00:18:18] But everybody all the traders all the investors are really awaiting the big number coming out from envidia tomorrow Which we obviously got into and talked about in the last vlog But one thing I do want to talk about is another headline story

[00:18:30] Is about capital ones buyout of discover for over 35 billion dollars truly an all stock deal But truly remarkable in that space danielle the financial services sector This obviously is going to have a lot of people talking that we may be looking at more m&a activity this year

[00:18:50] In that sector. What is your analysis saying? Do you see any type of a volume increase as far as on the option side? So when you look at xlf, I mean i'll just say that I like this sector. It's a nice smooth

[00:19:03] Uh easier sector to trade when I first got into trading It was something that I traded quite a bit for that reason and when you look at xlf since last october It's basically been straight up. You also have a really nice consolidation right around that 40 price point

[00:19:18] And so i'm looking at the options chain here and i'm thinking for xlf I mean we can trade this continuously higher up into about 45 dollars a share ideally and so if we can get some more mergers we can get some more focus on this area

[00:19:32] Um, I think this is definitely a spot that we can continue looking at to the long side. Right? Yeah, I mean, you know Todd the other you know issue on financials is sort of blatantly obvious here that

[00:19:45] You have to make a decision as to when you think the Fed is going to start rating cutting breaks now There were some people out there. I don't know what they're smoking I would like to get whatever they're smoking uh that they're saying we're gonna have seven

[00:19:57] Rate cuts are you kidding me? You know, we would have seven rate cuts if the economy You know tanks and we're not getting any and you know, there's there's no tankage, right? It's simply a sign felt show. There's no tankage. No tankage, right?

[00:20:10] So um the financials that I've always traded have been actually the brokerage firms Particularly, you know in a bear at a bull market So we were also because of btc because of bitcoin and because of what's going on in the having etc

[00:20:25] We made a ridiculous amount of money this week buying options on the co nl Which is a 2x of coinbase because robin hood had come out and you know blow the numbers out of the water And coin basis five times or 10 times bigger than than robin hood

[00:20:41] I like options on leverage things in in the position. I want to be at because now i'm getting a double top I think we made a i'm just taking the number here. We'll get 787 return on a $5,000 investment in co nl

[00:20:56] Colleges and we sold the put options so that we got up, you know, most of our money back Finances in a bull market rock of particularly stock trade Finances when when we start actually getting cuts they rock right so and not necessarily the same way

[00:21:12] Um because there's you know, their their interest rates come down But but when we hit that bottom last year daniel you must have been all excited with financials and then of course then the regional banks all came down because of

[00:21:25] The blow up on office buildings, etc and yada yada yada But i'm totally with you that this isn't maybe the most exciting part But it's it's really nice to get option premium and make money on the upside. Yeah, I like it

[00:21:38] I mean, I think it's a strong sector and I think it makes sense to continue Looking for a higher trade, especially as it just continues to recover. That's right Yeah, I double bottom in october, you know the beginning of november and

[00:21:51] And that's when you know people start pricing against seven rate cuts blah blah blah But I'm totally with you man. It's that chart is long and strong. That's right So, okay, let's pivot off of this daniel last time we had you on the show

[00:22:05] You were really looking at the s and p 500 you you I know this is an area that you trade Um, if you could tell what do you think right now?

[00:22:14] I mean there's so many eyeballs with a lot of the analysts that we have on are giving us their forecast for the year But you're trading options. You're looking at it in a different approach Explain to the audience what you're thinking of for the spx right now

[00:22:27] So when you're looking at the spx, I mean, there's a lot of opportunity there Especially when you're you know day trading or swing trading just to trade within a range I mean overall, I think that the spx

[00:22:38] Had a fantastic start to the year right and we traded right up to about 50 48 So again, I like to look at those key psychological values about 50 50 was my price target just for you know, the shorter term I do think that we're gonna end up at 50 100 here pretty soon

[00:22:55] But I want to caution viewers right now because The last two weeks of february are typically a seasonally bearish time And so, you know, we have that pullback that we've seen that kind of started today We have invidia earnings coming up

[00:23:09] And so one thing that I will do during this time frame is all all used And I'll hedge a little bit in the spx. So, you know now that we've fallen below 5000. We're at 49 75 You know traders can hedge to the downside

[00:23:28] Even into 4900 I think would be a pretty decent bet just looking for a pullback, you know this week and next week But ultimately once you get into march Especially as you get closer to earning season, you know, we typically start to see the stock market rallying again

[00:23:46] And I mean overall I'm bullish on the spx. It's an election year I just think that this is a ticker that for options traders, you know, they have a lot of volume a lot of liquidity

[00:23:58] And when the market's pulling back it's something that you know, you can easily jump on To trade to the downside as a hedge and then when you start going back up I mean you can ride the wave again. Hey, so so daniel we have the

[00:24:12] Essentially the magnificent eight and then we have the non magnificent 492 and has some p500 um Where the earnings growth on the top eight Is about 24 percent year over year the earnings growth on the bottom for excuse me for 492

[00:24:30] Is negative 4% so why not just bet on where the freaking Earnings are and take, you know some type of a the top eight and forget about those jokers that aren't doing anything I mean to be honest. That's really what I do these days now. I mean

[00:24:45] There was a long time where I would trade all kinds of different names and I'd be looking for different patterns and setups on You know, whatever ticker it showed up on but for the past couple years

[00:24:56] It just hasn't really made any sense to trade anything other than the big names Especially when you're an options trader You have that weekly liquidity that you can use to sell spreads or buy spreads and you know because of all this action with the

[00:25:11] Market makers and these magnetic values that you have. I mean it doesn't really matter if it's going up or down You know if you have a good feel of price action and technical analysis and you can use your options chain to identify different targets

[00:25:26] Um, I really just focus on these magnificent seven magnificent eight stocks and for the most part I don't really trade that much else Yeah, I it's I've never seen you know, but everybody's dwegged out about concentration

[00:25:40] That eight stocks are basically responsible for all the s and p 500 gains this year, but last year it was you know the terrific 10 But it is what it is. You know, I mean I mean to be Obstinate. Oh gosh

[00:25:54] There's true value in energy names when oil is going down from 105 dollars down to 72 come on man You know value investing quote unquote has not worked for you know most of my life

[00:26:08] It was great in the 70s early 80s. You know, you had you know, you had crazy stuff You could buy stuff for two p. E's right? But but the world has become a lot more sophisticated And yeah, why should I you know? Look if I'm wearing buffett

[00:26:23] I can buy something and then it will be marked up because it's it's in the buffet you know house of Hall of Fame So the multiple that Buffett gets with bircher halfway

[00:26:35] Is about 2x what those companies that they own would get so that's that's an outlier and I've owned that I've owned them for 30 40 years But they are the exception not to rule the earnings growth is in

[00:26:49] The is in the tech space basically and you know and at least for this last five years It's it's been almost a no-brainer Yeah, no, that's good. That's really good Um, well, I gotta tell you guys so much great information Danielle

[00:27:04] I have to say last time we had you one We had dozens of people from the audience wanting to know how to reach you Can you tell everyone how they can actually get in contact with you? Todd, did you tell them that she's married?

[00:27:17] Did they want to oh they wanted her they wanted her trading advice toby Okay, I'm sorry. I'm sorry But she is a she's a the absolute professional and she's a subject matter expert Obviously and I think they were they wanted to bounce some ideas

[00:27:31] But what's your what are your social handles for for social media? Okay, it's on x you can follow me at trader daniel d an i e l le's how you spell my name and then I also have a youtube Account as well

[00:27:44] So it's just at trader daniel and you definitely have to be careful because there is a lot of people pretending to be me But oh, is that right? Yes Yes, that is absolutely true

[00:27:56] But and I do I I do follow you and um, and I do receive uh several um Well notifications of other You know accounts, so it's actually kind of you and jeffrey hirscher Are famous for that but He is quite a bit actually it's quite interesting. Yeah

[00:28:16] So, uh, but trader daniel and we will also have that information in our description As well and uh for the show so daniel Thank you so much for joining us today on byhold

[00:28:27] So we can't wait for the nvidia numbers to come out because I know we're gonna have a lot of follow-up discussions with you later on Danielle just make it the real daniel's trader That's right. That's what I should call myself just be the real daniel's

[00:28:43] That's good. That's very good. All right. Well, listen. We want to thank everyone for joining us today Yeah, just a one one other note for everyone. Uh, we just on february 18th We hit our two-year anniversary for byhold sell

[00:28:57] And it's amazing how the show has evolved and the distribution channels that have opened up in those two years We want to thank all of you for making it happen

[00:29:05] Including all of our great guests like daniel shea as well as all the other we have dozens of others They come on the show frequently. We we really want to thank everybody so toby and I can't I can't express our um our gratitude

[00:29:18] Enough so um, but again, we have so many great things that are coming out as well He definitely will want to stay tuned. So with that said on behalf of tobin spiff and daniel shea The real daniel dammit Yes the trader daniel

[00:29:33] We want to thank everybody for joining us today and we hope to catch you next time. Well byhold sell take care Byhold sell brought to you by cross check management

[00:29:48] A new story gets shared by a friend on social media or you catch a tweet that really makes your blood boil But how do you separate fact from fiction? That's the premise behind disinformation A 10 part series from every green podcasts and emergent risk international coming this fall

[00:30:10] To and into disinformation wherever you get your podcast and remember don't believe everything you read