Wednesday, September 16, 2009

Talk About Leeroy

NVDA just got whacked. Likely due to report that their new chip came back from first silicon with a 2% yield. This can spell all sorts of bad news, but in reality it won't. The engineers will investigate the chips for causes of process flaws. Somewhere on some wafer enough clues will be there to figure out what's wrong with the silicon.

What you worry about when it comes to chip stocks is when the design or process is fundamentally flawed. NVDA's a fabless chipper, meaning they outsource the foundry work. Foundries usually are just a step behind Intel's production technologies, which typically funds most of AMAT. What I'm getting at is that NVDA's not looking a failure to get a new exotic process working, but instead the simple glitch in what was supposed to be a proven process with a new chip design.

Anyway, this is a Leeroy event. I had no idea the chips would come back bad. I did think the stock would be vulnerable to any upset and have to retreat to the ema20. Well, time to take what's been beautifully laid out on the table.

For the next paper trade, I'm going to select a Jan 10 call @ $15. Hello UVAAC for $2.15. Trading in 12.5% of whatever cash resulted from the previous paper trades. (I promise to get the numbers worked out within a week) This is another example of a little option trading excercise.

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