The King of Semiconductors is Coiling for a Move Higher

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  • Tech stocks have been a clear winner in the market, as they tend to be in most years. Looking to 2021, one major company in the semiconductor space looks poised to move higher.

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  • That’s because shares have sat out the most recent rally, instead trading in a tight range the past few months. Like a coiling spring, when a move happens, it could be huge. That’s why at least one trader sees a big move higher.

    The stock? Nvidia (NVDA). The semiconductor giant, best known for its graphics processing units (GPUs) has lagged in recent months, but still sports excellent long-term returns. And at least one trader sees a move higher, possibly as late as the company’s next earnings report in February.

    Given the best-of-breed company has been a laggard, there are multiple ways for investors to make a potential profit here.

    Action to take: The March 2021 $600 calls offer enough time for the current consolidation trade to end. Trading at about $21, each option contract sounds a bit pricey at $2,100. Compared to buying 100 shares, however, it’s still a less expensive way to profit from a move higher. Traders should look for high double-digit gains on this trade.

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  • Traders sitting in a lot of cash bemoaning investment opportunities right now could sell the March 2021 $475 puts. That trade will put about $2,150 of additional cash into an investor’s account, with the caveat that they’ll have to buy shares if they drop under $475 by March… a move that seems unlikely.