Nvidia is very highly ranked in several of my stock screeners and although the TTM P/E Ratio is relatively high at 45, it is historically low for Nvidia and is satisfactory given its future estimated potential sales and profits growth rates. So, I decided I wanted to continue with an ongoing Covered Calls position in Nvidia. Since my current Nvidia CC position expires today and will be assigned, I established another new NVDA CC position to continue with my investment in Nvidia. The Implied Volatility of these Calls is very high at 61.3 which is attributable to the existence of its quarterly earnings report on May 28th (which is prior to the May 30th options expiration date). Consequently, I decided to establish a moderately in-the-money strike price with a 72.6% probability that the stock will be in-the-money on its 5/30/2025 expiration date.
As detailed below, a potential return-on-investment result is +2.1% absolute return-on-investment (equivalent to +54.8% annualized
return-on-investment for the next 14 days) if the Nvidia share price is in-the-money (i.e. above the $125.00 strike price) and therefore assigned on its May 30th, 2025 options expiration date.
Nvidia Corporation (NVDA) -- New Covered Calls Position
Today's buy/write net limit order transaction was as follows:
5/16/2025 Bought 400 Nvidia Corporation shares at $135.12.
5/16/2025 Bought 400 Nvidia Corporation shares at $135.12.
5/16/2025 Sold 4 NVDA 5/30/2025 $125.00 Call options @ $12.70 per share.
A possible overall performance result (including commissions) for this Nvidia Corporation Covered Calls position is as follows:
Covered Calls Net Investment: $48,970.68
= ($135.12 - $12.70) * 400 shares + $2.68 commission
Net Profit:
(a) Options Income: +$5,077.32
= ($12.70 * 400 shares) - $2.68 commission
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If 400 Nvidia shares assigned at the $125.00 strike price at expiration): -$4,048.00
+($125.00 strike price - $135.12 stock purchase price) * 400 shares
Total Net Profit Potential (If 400 Nvidia shares in-the-money and therefore assigned at the $125.00 strike price at the options expiration date): +$1,029.32
= (+$5,077.32 options income + $0.00 dividend income - $4,048.00 capital appreciation)
A possible overall performance result (including commissions) for this Nvidia Corporation Covered Calls position is as follows:
Covered Calls Net Investment: $48,970.68
= ($135.12 - $12.70) * 400 shares + $2.68 commission
Net Profit:
(a) Options Income: +$5,077.32
= ($12.70 * 400 shares) - $2.68 commission
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If 400 Nvidia shares assigned at the $125.00 strike price at expiration): -$4,048.00
+($125.00 strike price - $135.12 stock purchase price) * 400 shares
Total Net Profit Potential (If 400 Nvidia shares in-the-money and therefore assigned at the $125.00 strike price at the options expiration date): +$1,029.32
= (+$5,077.32 options income + $0.00 dividend income - $4,048.00 capital appreciation)
Potential Absolute Return-on-Investment: +2.1%
= +$1,029.32/$48,970.68
Potential Annualized Return-on-Investment: +54.8%
= (+$1,029.32/$48,970.68) * (365/14 days)
