Investors Evaluate Selling Puts for NVIDIA Shares Amid Market Caution
Investors looking to purchase NVIDIA Corp (Symbol: NVDA) shares at the current price of $113.63 may consider an alternative strategy: selling puts. One notable contract is the December 2027 put at the $80 strike, currently with a bid of $11.55. By collecting this premium, investors can achieve a 14.4% return on the $80 commitment, translating to a 5.5% annualized rate of return.
It’s important to note that selling a put doesn’t allow investors to benefit from NVIDIA’s potential upside like owning shares does. The put seller will only acquire shares if the contract is exercised, which occurs when the market price falls below the strike price. Exercising the put at the $80 strike would only be advantageous if it yields a better outcome than selling shares at the current market price. Without a significant drop—specifically a 29.6% decline—resulting in a cost basis of $68.45 per share (after accounting for the $11.55 premium), the only benefit for the put seller is the collected premium offering a 5.5% annualized return.
The chart below illustrates the trailing twelve-month trading history for NVIDIA Corp, highlighting the position of the $80 strike relative to this history:
Analyzing the above chart alongside NVIDIA’s historical volatility provides context for determining whether selling the December 2027 put at the $80 strike offers a reasonable reward for the associated risks. The trailing twelve-month volatility of NVIDIA Corp—factoring in the last 249 trading days—stands at 59%.
On Monday afternoon, the put volume across S&P 500 components reached 810,250 contracts, matching call volume for a put:call ratio of 0.72. This figure is above the long-term median ratio of 0.65, indicating a higher interest in puts than expected based on historical trends.
To explore additional put option strategies with varying expirations, investors can refer to the NVDA Stock Options page.
Top YieldBoost Puts of the Nasdaq 100 »
Additional Resources:
- ORLY Average Annual Return
- TPL Historical Stock Prices
- Institutional Holders of DXJS
The views and opinions expressed herein are the author’s and do not necessarily reflect those of Nasdaq, Inc.
