Nvidia continues to be the leading AI-focused semiconductor company and their innovations continue. For example, just this past month they announced a new product category, the DGX Spark AI-based workstation for software developers and data scientists that will incorporate their newest Blackwell chip technology. Nvidia is my top-ranked megacap technology company since their primary customers are other IT behemoths such as Microsoft, Alphabet, and Meta, each of whom is continuing with substantial annual increases in their capital expenditure purchases with Nvidia. Think about it -- Nvidia is the primary revenue beneficiary from the huge expenditures of several of its tech megacap brethren.
So, because of my continuing bullish outlook for Nvidia's potential growth in both revenue and earnings, this position continues my recent practice of establishing short-term in-the-money Covered Calls positions in Nvidia. Note: I have another existing Nvidia Covered Calls position at the $133.00 strike price with a 6/13/2025 expiration date. I prefer short-term (less than 30 days duration) positions since: (1) the potential annualized return-on-investment is higher for shorter-duration positions; and (2) short-term positions provide us a more frequent opportunity to re-evaluate the existing positions, so we can react quickly if news causes a substantial stock price volatility decline -- whether bullish or bearish.
As detailed below, a potential return-on-investment result is +1.6% absolute return-on-investment (equivalent to +36.6% annualized
return-on-investment for the next 16 days) if the Nvidia share price is in-the-money (i.e. above the $134.00 strike price) and therefore assigned on its June 20th, 2025 options expiration date.
Nvidia Corporation (NVDA) -- New Covered Calls Position
Today's buy/write net limit order transaction was as follows:
6/4/2025 Bought 300 Nvidia Corporation shares at $140.23.
6/4/2025 Bought 300 Nvidia Corporation shares at $140.23.
6/4/2025 Sold 3 NVDA 6/20/2025 $134.00 Call options @ $8.35 per share. The Implied Volatility of these Calls was 38.5% when this position was established.
A possible overall performance result (including commissions) for this Nvidia Corporation Covered Calls position is as follows:
Covered Calls Net Investment: $39,566.01
= ($140.23 - $8.35) * 300 shares + $2.01 commission
Net Profit:
(a) Options Income: +$2,502.99
= ($8.35 * 300 shares) - $2.01 commission
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If 300 Nvidia shares assigned at the $134.00 strike price at expiration): -$1,869.00
+($134.00 strike price - $140.23 stock purchase price) * 300 shares
Total Net Profit Potential (If 300 Nvidia shares in-the-money and therefore assigned at the $134.00 strike price at the options expiration date): +$633.99
= (+$2,502.99 options income + $0.00 dividend income - $1,869.00 capital appreciation)
A possible overall performance result (including commissions) for this Nvidia Corporation Covered Calls position is as follows:
Covered Calls Net Investment: $39,566.01
= ($140.23 - $8.35) * 300 shares + $2.01 commission
Net Profit:
(a) Options Income: +$2,502.99
= ($8.35 * 300 shares) - $2.01 commission
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If 300 Nvidia shares assigned at the $134.00 strike price at expiration): -$1,869.00
+($134.00 strike price - $140.23 stock purchase price) * 300 shares
Total Net Profit Potential (If 300 Nvidia shares in-the-money and therefore assigned at the $134.00 strike price at the options expiration date): +$633.99
= (+$2,502.99 options income + $0.00 dividend income - $1,869.00 capital appreciation)
Potential Absolute Return-on-Investment: +1.6%
= +$633.99/$39,566.01
Potential Annualized Return-on-Investment: +36.6%
= (+$633.99/$39,566.01) * (365/16 days)
