Nvidia in a nosedive!? Don't fret, let me show you how to make money in the midst of chaos!
Nvidia is plunging again! Are you suffering heavy losses?![]()
Don't worry, as a seasoned trader, I'll share how to protect your wallet in this market.
First, don't panic, keep a watchful eye on the market situation：
On the first trading day of September, U.S. stocks faced a black opening, with the S&P 500 falling over 2% to its lowest level since August 14, the Dow Jones dropping 1.5% below 41,000 points, the Philadelphia Semiconductor Index plunging 7.8%, and the "fear index" VIX surging over 40% to nearly 22. AI leader Nvidia closed down 9.5%, marking the deepest market value loss among U.S. stocks. Some analysts suggest it is "digesting the pains of growth," with a bright future ahead, while others are skeptical about the sustainability of Nvidia's massive investments in AI hardware following its financial report.
Reasons for the decline:
– Concerns about a hard landing in economic data: U.S. manufacturing data for August showed a contraction, sparking worries about an economic slowdown and leading to a stock market sell-off.
– Bank of Japan hinting at rate hikes: Bank of Japan Governor Kuroda signaled potential interest rate hikes, causing expectations for further tightening and impacting yen carry trades.
– Seasonal sell-off: September historically sees poor stock returns, with increased market volatility due to traders reassessing portfolios post-Labor Day. Additionally, negative seasonal effects on chip stocks are evident, with the Semiconductor Industry Association reporting a decline in chip sales in July, indicating industry weakness.
As smart investors, how should we respond to this situation?
Looking ahead, if the Federal Reserve only cuts rates by 25 basis points in September, if the August nonfarm payroll data is weak, and if there is increased uncertainty surrounding the U.S. election, the market may continue to experience volatility in the fall.
– Consider allocating to U.S. Treasury ETFs or defensive stock ETFs: U.S. Treasury ETFs like $iShares 20+ Year Treasury Bond ETF (TLT.US)$ / $Direxion Daily 20+ Year Treasury Bull 3X Shares ETF (TMF.US)$
– Inverse ETFs: There are inverse and leveraged inverse ETFs available for Nvidia, the semiconductor sector, and the Nasdaq in the U.S. market, including $Direxion Daily NVDA Bull 2X Shares (NVDU.US)$ , $Direxion Daily Semiconductor Bear 3x Shares ETF (SOXS.US)$ , $ProShares UltraPro Short QQQ ETF (SQQQ.US)$
If you are bullish on Nvidia's future, here are some safer strategies to help you:
1.Pyramid trading strategy: buying stocks in tranches
When a stock is in a downtrend, predicting the exact bottom is extremely challenging. Instead of betting everything at one price point, buying in tranches could be a smarter approach.
Here's a method for buying in a downtrend: the Pyramid Strategy.
Here are some practical tips:
- Decide on the proportion for each tranche, gradually increase purchases as the price drops.
- Ensure that the intervals between buy points are significant enough to avoid exhausting funds too quickly.
- Consider setting a final and largest buy at a price below your worst-case scenario. This ensures you have capital left if the stock drops beyond your expectations.
If the stock rebounds before you've completed all your planned buys, that's still a win—you'll have a partial position that can profit, and remaining funds to deploy in future opportunities.
2.Cash secured put: acquiring stock at a lower price
Finally, let's explore a popular option strategy called the Cash Secured Put.
For example, suppose $NVIDIA (NVDA.US)$ is in a downtrend and currently trading at $105. An investor believes it will bottom out around $100 and wants to buy it at that price. He can sell a put option with a strike price of $100, assuming he can collect a premium of $1. Here are the possible outcomes:
Scenario 1: Stock Price Falls Below $100
In this case, the put option is in the money, and the buyer is likely to exercise it. The investor will be obliged to buy 1 share of NVIDIA at $100.
After accounting for the $1 premium he received, his effective purchase price is $99. Not only does he acquire the stock at his desired price, but he also reduces his cost basis.
Scenario 2: Stock Price Stays Above $100
Here, the put option is out of the money, and the buyer is unlikely to exercise it. The investor won't be obligated to buy NVIDIA shares, and he keep the $1 premium as profit, earning extra income without buying the stock.
Trading Options on moomoo: Markets> Options
Finally, leave a comment to share your thoughts on this recent market plunge! Did you manage to avoid this downturn?![]()
Disclaimer: Community is offered by Moomoo Technologies Inc. and is for educational purposes only.
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101567985 : Hi Haiwe,Under your SecuredPut, is it also a min of 100 NVDA shares to pay for premium so,$100 as example?and in your explanation,the “buyer “ refer to the other counter party and seller/investor as yourself trying to sell the PUT?simple clarification.thanks![[undefined]](https://static.moomoo.com/nnq/emoji/static/image/default/default-black.png?imageMogr2/thumbnail/36x36 "undefined")
Zamm : How about sell all in NDVA for a while. Let the turbulence cooling untill end. After that see the situation, do F&T analysis then buy. Look like this way better or what?
Still-Learning : Nicely said. Good strategy. Loved it![[undefined]](https://static.moomoo.com/nnq/emoji/static/image/default/default-black.png?imageMogr2/thumbnail/36x36 "undefined")
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Haiwe OP Zamm : Determining when the market has stopped fluctuating is a very difficult question![[undefined]](https://static.moomoo.com/nnq/emoji/static/image/default/default-black.png?imageMogr2/thumbnail/36x36 "undefined")
. Therefore, choosing to gradually purchase ETFs in batches can also be a good method, no one can truly buy at the bottom of the market.![[undefined]](https://static.moomoo.com/nnq/emoji/static/image/default/default-black.png?imageMogr2/thumbnail/36x36 "undefined")
Haiwe OP Still-Learning : ya thank you~
10baggerbamm : you're only 2 weeks late but that's what makes a market.. leaders and followers. typically the useless Wall Street analyst downgrade companies after a 30 to 40% drop but they maintain the buy on it the entire way down and they won't upgrade a stock until it busts a new high and by that time it already rallied 50 to 75%. you need to skate where the puck is going not where it is. you should have bought puts two weeks ago. if you're going to sell puts collecting the premium is fine but understand you tie up that entire amount of that capital in your account when you sell that put so if you sell 10 contracts at a 100 strike that's $100,000 that's being allotted out of your account that you cannot use for something else. of course if you want to go on margin it's only $50,000. do not go out more than one week at a time the markets far too volatile and too many things can happen. and understand that if there's a gap down and it crosses your strike price that volatility premium increases significantly so if you think you're going to close out that position your losses go up exponentially. so if you sell 100 strike and now Nvidia is 90 it's not $10 for you to buy it back you're going to be buying it back at $13-14 a contract if not more even in the same week of expiration. and when you sold that put you probably only collected about a dollar and a half a contract
Haiwe OP 10baggerbamm : Thank you for your suggestion, it's very good~![[undefined]](https://static.moomoo.com/nnq/emoji/static/image/default/default-black.png?imageMogr2/thumbnail/36x36 "undefined")
But this is just my understanding of the current market situation, so I wrote it like this. Currently, NVDA has been falling for a few days. For investors bullish on NVDA, selling put options until a reasonable price is reached can also be a good choice. In addition, I also mentioned that you can slowly buy ETFs, which generally have lower long-term holding risks and cost prices.
10baggerbamm Haiwe OP : I understand what you're saying I sell puts multiple times a month. I will tell you that unless you're prepared to take that position or buy the puts back in an enormous loss when you have this level of volatility it's best to look elsewhere. I understand completely the risk parameters of selling a put you sell a put 100 strike in video one week out let's say it's a dollar you're downside risk is 100 minus the premium you collect 99. the problem is if you own the common stock your loss doesn't command a premium as it accelerates to the downside. a put volatility premium increases parabolically based off of the speed of the decline of the stock and how 4 in the money it is. so if you decide at $95 you can't take the heat anymore and you own the common stock you sell it you take a five-point loss if you sold that put it's not going to be five points it's going to be Five points Plus that premium and time value and the premium will be three or four more points because the speed at which it crossed through your strike price so your losses are magnified
Coach Donnie : Buying the dip… all the BS
always blows over with Solid Assets. Build in the red.. 
Haiwe OP 10baggerbamm : Perhaps using ETF allocation for purchasing would be a more stable choice.
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