Qualcomm’s recent introduction of the Snapdragon 800 processor just nipped NVIDIA’s release of its new Tegra 4i, and the Tegra, despite its superior quality, will not appear in mainstream devices until later this year. This delay could cause NVIDIA further harm, as other competitors are attempting to make similar improvements to their own products. The Tegra 4i has faced further challenges as its outlay requires modifications to mobile devices that many producers of these devices are unwilling to make to this point.
Several mobile device companies have moved to in-house processor production and, as a result, have blocked NVIDIA from participating in many of the most promising subsections of the mobile market. Apple and Samsung, makers of the iPad and the Galaxy Tab, respectively, make up much of the market share in tablets into which NIVIDIA cannot even hope to break. Despite the high potential for return in the super-advanced Tegra processor, the success of this move will largely depend on external market forces over which NVIDIA has very little control. Traders seem to think that the chip will pan out in the end; the stock is up 13% since the end of January, but those gains could easily be erased by a negative earnings report.
My Trade: Buy the NVDA May Weekly 14.5 – 15.5 Call Spread for $0.10
Risk: $10 per 1 lot
Reward: $90 per 1 lot
Breakeven: $14.60
Delta: Long
Gamma: Long
Vega: Long
Theta: Short