NVDA Debit Put Spread Appears to be Undervalued at $3.50


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This NVDA Debit Put Spread Aims for 43% ROI in 15 Days

Bearish play with a target stock price of $106 or below

Strategy has +43% upside potential and 3% undervalued


Expiration27-Sep-24
Buy111 Put
Sell106 Put
Debit:$3.50


Nvidia has fallen by -4.8% today to $102.06. The above option strategy is a bearish play that shows a theoretical 71% win rate, based on NVDA's historical stock price behavior.

Option Profit Calculator for NVDA Put Spread at 27-Sep-24 Expiration

If NVDA stock price at expiration is at or below $106.00, this spread has a 43% upside potential

The optimal stock price for this option strategy is to close at or below $106.00 on the expiration date, September 27, 2024. In that scenario, both puts would be in-the-money, so the spread would be worth the maximum value of 5.00. That would equate to the potential upside of +43% for this put spread with 15 days left to expiration.

The maximum gain will be realized if the stock price is at or below 106.00. The maximum gain is $1.50

The breakeven point is at 107.50, which is 5.2% above the current spot price.

The maximum loss will occur when the stock price is at or above 111. The max loss is $3.50.

NVDA Spread Current Market Price vs. Historical Average

NVDA Put Spread is trading at a 3% discount to historical average.

Using historical data to measure how a similar spread in NVDA was priced in the market, the 4-year average value was 3.62, with a high mark of 3.95 and a low of 3.23.

Currently, this vertical put spread is bid at 3.10 and offered at 3.50. The midpoint of the spread is 3.30.

If we use 3.62 as our historical fair value benchmark, the current market ask price is at a 3% discount, while the current market midpoint represents a 9% discount.

Current PriceHistorical Values of Similar Spreads
BidAskMidpointAverageHighLow
3.103.503.303.623.953.23
Market Chameleon captures daily records of market data to calculate historical benchmarks and generate estimated values.

Takeaway

The NVDA put spread we've identified here can be a good way to play a bearish outlook because the option strategy has a +43% upside potential, is 3% underpriced relative to historical measures, and will benefit from a stock price at or below $106.

See how Market Chameleon can help you make smarter and more efficient trades!



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NOTE: Stock and option trading involves risk that may not be suitable for all investors. Examples contained within this report are simulated And may have limitations. Average returns and occurrences are calculated from snapshots of market mid-point prices And were Not actually executed, so they do not reflect actual trades, fees, or execution costs. This report is for informational purposes only, and is not intended to be a recommendation to buy or sell any security. Neither Market Chameleon nor any other party makes warranties regarding results from its usage. Past performance does not guarantee future results. Please consult a financial advisor before executing any trades. You can read more about option risks and characteristics at theocc.com.


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