NVIDIA Drops Below 900! Let's talk about the options for shorting NVIDIA using different tools: options, ETFs, and margin trading.

In the backdrop of postponed rate cuts, disappointing macro data, and insufficient sector catalysts, the markets took a hit yesterday, with all three major indices closing lower. $SPDR S&P 500 ETF(SPY.US)$ dipped below its 50-day moving average.

Tech stocks took a hit, with $NVIDIA(NVDA.US)$, a company valued at over $200 billion, surging past 900 at the opening bell only to retreat and close down by 2.48%.

Yesterday, when NVIDIA breached the 900 mark, I took a 20% position and doubled down on shorting NVIDIA using ETFs.

To my surprise, I made a profit overnight, but I'm not rushing to cash out just yet. I'll continue to monitor the situation closely because, after all, it's my money on the line.

When it comes to shorting NVIDIA, you have three main options: options, ETFs, and margin trading. But why did I choose ETFs over the other two? Well, let me break it down for you.

1. Options: There are two common options strategies for shorting NVIDIA:
   - Buying put options (Long Put)
   - Selling call options (Short Call)
For example, consider a Put option expiring in a month with a strike price of 900. Yesterday, it surged over $2000 from its low point to the close, marking a 50% increase. And mind you, this isn't even a short-term option. If it were a monthly option expiring on April 19th, the surge would be even more startling.

2. Inverse ETFs: These specialized ETFs provide a convenient way to short NVIDIA without the complexities of options. Some examples include:
   - $DIREXION DAILY NVDA BEAR 1X SHARES(NVDD.US)$ : Offers a one-to-one inverse exposure to NVIDIA.
   - $AXS 1.25X NVDA BEAR DAILY ETF(NVDS.US)$ : Provides 1.25 times leverage on shorting NVIDIA.
   - $GraniteShares 2x Short NVDA Daily ETF(NVD.US)$ : Offers twice the inverse exposure to NVIDIA.
 

Of course, there are corresponding long ETFs as well, like $GraniteShares 2x Long NVDA Daily ETF(NVDL.US)$ .

3. Margin Trading: Shorting on margin involves borrowing and selling stocks, then repurchasing them at a lower price.

This is similar to the erosion seen in the $ProShares UltraPro QQQ ETF(TQQQ.US)$. While $Invesco QQQ Trust(QQQ.US)$ hit a new high, TQQQ still hasn't reached its 2021 peak.

Let's illustrate with a simple mathematical example: suppose we observe a basic market scenario where the Nasdaq 100 index (tracked by QQQ) performs as follows over two days: Day 1: Index rises by 10%; Day 2: Index falls by 10%.

- QQQ first rises by 10% and then falls by 10%.
- TQQQ rises by 30% initially and then falls by 30%.

Assuming we initially invest $100 in each:

- The final price of QQQ is $99, which represents a 1% decline from the initial price of $100.
- The final price of TQQQ is $91, representing a 9% decline from the initial price of $100.

The difference of $8 between the two reflects the "time cost" of leveraging borrowed funds.

I wasn't expecting NVIDIA to flip from gains to losses yesterday. I had kept a significant portion of my portfolio in cash, intending to gradually increase my positions. The semiconductor sector seems to be lacking catalysts, and short-term bullish sentiments are waning. That's just how I feel.

S&P tends to experience over 10% corrections once a year and 5% corrections 2-3 times a year. It's not a bad idea to keep some cash on hand to buy into the index during these pullbacks.

$Taiwan Semiconductor(TSM.US)$ 's earnings report is due on Thursday, so there's something to look forward to. But I wouldn't recommend jumping into TSM options given the scary IV percentile. How much does the stock need to rise for the options to make money? Think about it.

Hope this helps you!