Hey there, Power Profit Traders!
Good Monday morning to you! Today is the first trading session of 2022, and we’ve got plenty of great trades in the making.
PLUS, my LIVE trading sessions are BACK, starting at 9:30 a.m. ET right here! Hop in the room and watch me talk crypto and a whole lot more at the opening bell. (And don’t forget to bookmark this page for REPLAYS of my sessions.)
Now, you know that I trade a great deal in some of the best stocks in the market. I run my pattern studies to find only the BEST stock and options trading opportunities, attempting to maximize profit potential while limiting my risk.
But outside of stocks and options, I focus on the increasingly exciting cyber coin market. This is the future of trading, and has already generated fortunes for many of those taking the time to study the coins – and when to trade them.
Today, I want to showcase a trade that I made last month and wrapped for a profit last week, because it combines the best of the options and coin markets.
Yep, it’s possible to combine both coins and options in one trade.
It’s what I did for my Fast Fortune Club members, and I want to show you why it worked… and why you might see more of this strategy in the new year.
One Trade for Coin & Chips
Cyber coins demand major computing power to solve algorithmic problems, in order to be rewarded with a newly minted coin. And once they are minted or mined, they must be accounted for and verified on an ongoing basis.
There are the classically formatted coins such as Bitcoin (BTC), which still utilize proof of work in their blockchain accounting universes. These require ever more amounts of computing power to keep the electricity flowing through chips and processors.
Then there are the newer coin formats that emanate from Ethereum (ETH), which are increasingly using proof of stake processing that both limits computing needs and power consumption, making them all the more efficient and more green for today’s markets.
But regardless of format – proof of work or stake – ALL all coins require major computing power. And this comes down to state-of-the-art chips.
Chips have become a major interest in the markets over the past year. Everything from toasters to automobiles require numerous chips for processing and memory, and demand has been surging with smart technology.
Meanwhile, supplies of chips continue to be short, as manufacturers struggle with longer lead times and capacity issues. This was especially prevalent in 2021, which was a catch-up year after Covid halted demand and many contracts were canceled in 2020.
As such, we continue to have shortages reported on a weekly basis.
Processing chips are the pinnacle of the chip market – especially when it comes to coins. And no other chips come close to meeting coin-computing and processing requirements than GPU (graphics processing units) chips.These are specialized processing chips that are more powerful than traditional CPU (central processing unit) chips, in that they can process multiple things simultaneously with greater speed.
This is vital for the coin market, as well as for gaming and video applications, of course.
And last month, I set up a pattern trade for my Fast Fortune Club members in one of the leaders in the GPU chip business.
This trade combined the power of the coin market with the major demand for chips.
The Envy of the Chip Market
Nvidia (NVDA) was founded in the early 1990s.
Fun fact: Originally, the co-founders were more focused on their technology than a name for the company, so they reportedly called it “NV” for “next version” (as in the next version of chips). They eventually settled on a derivative of the Latin word for “envy” – “invidia” – as they believed their chips would be the envy of the world. Thus, Nvidia came to the public market in 1999.
Nvidia is a global leader in GPU chips and processors, as well as related process applications used for higher-power gaming and other computing needs – including coin mining and maintenance.
I have been following the trading patterns of NVDA and its huge market outperformance for many years. For the trailing 10 years, in fact, the stock has returned 1,016%, compared to the S&P 500 Index’s (SPX) 133% and the S&P Information Technology Index’s 303% return in the same time frame.
NVDA, SPX, and S&P 500 Information Technology Index – Source: Bloomberg
So, Nvidia is always a stock that I can turn to when it appears on my Money Calendar or other proprietary pattern tools… and as alluded to earlier, I flagged it for a Fast Fortune Club trade last month.
On Dec. 16, my seasonal pattern analysis indicated NVDA was ripe for a year-end rally.
However, in order to capitalize on another year of upside momentum in this time frame WITHOUT risking a lot of capital, I opted for a bull call spread (as opposed to simply buying a call option).
This entailed buying a call option expiring Jan. 21, 2022, at a strike price near the current stock price of NVDA at the time.
And to reduce the cost of the overall trade, I simultaneously sold a call with a higher strike price and the same expiration date. The premium received for the sold leg of the spread helped to lower my cost of entry on the long call, which represented my maximum risk.
And as you can see in the price graph below, my seasonal pattern trading analysis for NVDA didn’t lead us astray – and we took profits in Fast Fortune Club last Tuesday, Dec. 28!
Nvidia Stock Price Dec. 16-28 – Source: Bloomberg
So, kids, that’s your Power Profit Trades lesson for today! Be sure to tune into this morning’s Power Profit Trades session at 9:30 a.m. ET right here!
Have a great day!
Tom Gentile
America’s #1 Pattern Trader
