Nvidia (NASDAQ:NVDA) lead the pack in the field of artificial intelligence (AI) capable graphics processing units (GPUs). However, even an industry dominator like Nvidia can temporarily lose favor among investors. That’s actually good news, since it means that Nvidia options traders can seize the moment and get paid with cold, hard cash.
Don’t just jump into a hasty trade, though. First and foremost, investors should identify the main reasons for the recent pullback in Nvidia stock. Then, assuming the world isn’t ending and Nvidia isn’t going bankrupt, we can look for some opportunistic options trades.
Nvidia AI-Chip Delay Rattles Investors
Nvidia is usually prompt in rolling out the latest and greatest versions of the company’s popular AI chips. Consequently, investors were rattled when they discovered that Nvidia will delay the release of its new Blackwell AI chips.
Nvidia’s Blackwell chips are supposed to perform AI-related tasks more than twice as fast as the company’s current Hopper chips. Driven by the upcoming Blackwell launch, Nvidia expects to generate as much as $150 billion in data-center revenue next year.
So, there’s no need to worry. Nvidia anticipates that it will ramp up the production of its new Blackwell processors during the second half of 2024. It’s a rollout that’s delayed but not abandoned, and Nvidia will undoubtedly sell plenty of these powerful processors.
More generally, Nvidia stock pulled back recently because the market is jittery about a potential slowdown in the U.S. economy. That’s not Nvidia’s fault, of course. If you feel that the fears surrounding America’s economy in general, and Nvidia in particular, are overblown, then why not try an options trade today?
Selling Nvidia Put Options for Quick Cash
The prices of Nvidia put options tend to go up when the share price goes down. Therefore, you can sell an Nvidia put option and collect a sizable “premium” cash payment up front.
By selling a put option, you’ll agree to buy 100 shares of Nvidia stock at an agreed-upon price, called the strike price. Since the market is fearful about Nvidia, you can sell a put option, collect an immediate cash payout, and possibly buy 100 Nvidia shares at a low strike price (if the stock goes down that far).
Here are a few possible trades you can make (prices are as of this writing, and are subject to change, so check with your broker):
- Sell Nvidia $90 strike put option expiring Oct. 18 for $5.50 per share, receive $550 cash payment
- Sell Nvidia $85 strike put option expiring Nov. 15 for $5.05 per share, receive $505 cash payment
- Sell Nvidia $87.50 strike put option expiring Dec. 20 for $6.30 per share, receive $630 cash payment
These are just a few possibilities. Feel free to try different strike-price and expiration-date combinations. Moreover, make sure that you have enough cash in your account to potentially buy 100 Nvidia stock shares at the strike price.
The Fear Is Here, so Give Nvidia Options a Try
Nvidia isn’t collapsing, by any means. Furthermore, the U.S. economy probably isn’t in deep trouble, even if some investors are overly fearful. All of this adds up to elevated put-option prices — and as they say, volatility leads to opportunity.
Hence, if the options market is still open, I invite you to check with your broker and consider selling one or more Nvidia options. You’ll get paid cash up front, and you might get to purchase 100 Nvidia stock shares at a discounted price.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
