NVIDIA reported their Q3 earnings after the market close Wednesday. They substantially beat analysts' estimates on all relevant metrics including both earnings and revenue (which at $57 billion was 62.5% above the comparable quarter last year). In addition, their Q4 guidance at $65 billion is 65.4% above last year and their sequential gross margin guide increases from 73.6% in the current quarter to 75.0% for Q4. Surprisingly, their stock reacted very negatively yesterday. I decided that the negativity was unwarranted -- so this morning I established this new Covered Calls position.
As detailed below, two potential return-on-investment results are: (1) +2.6% absolute return-on-investment (equivalent to +67.8% annualized return-on-investment for the next 14 days) if NVIDIA's share price is unchanged at the $177.70 stock purchase price on the December 5th, 2025 options expiration date; and (2) +6.8% absolute return-on-investment (equivalent to +177.7% annualized return-on-investment for the next 14 days) if NVIDIA's share price is in-the-money (i.e. above the $185.00 strike price) and therefore assigned on its December 5th, 2025 options expiration date.
NVIDIA Corporation (NVDA) -- New Covered Call Position
NVIDIA Corporation (NVDA) -- New Covered Call Position
Today's buy/write net limit order transaction was as follows:
11/21/2025 Bought 200 NVIDIA Corporation shares at $177.70.
11/21/2025 Bought 200 NVIDIA Corporation shares at $177.70.
11/21/2025 Sold 2 NVIDIA 12/5/2025 $185.00 Call options @ $4.50 per share. The Implied Volatility of these Calls was 52.0 when this position was established.
12/4/2025 Ex-dividend of $.01 per share.
12/4/2025 Ex-dividend of $.01 per share.
Two possible overall performance results (including commissions) for this NVIDIA Corporation Covered Calls position is as follows:
Covered Calls Net Investment: $34,641.34
= ($177.70 - $4.50) * 200 shares + $1.34 commission
Net Profit:
(a) Options Income: +$898.66
= ($4.50 * 200 shares) - $1.34 commission
(b) Dividend Income: +$2.00 = $.01 x 200 shares
(c) Capital Appreciation (If 200 NVIDIA shares close at the unchanged purchase price of $177.70 per share on the 12/5 options expiration date): +$0.00
+($177.70 closing price at expiration - $177.70 stock purchase price) * 200 shares; or
(c) Capital Appreciation (If 200 NVIDIA shares assigned (i.e. above the $185.00 strike price) on the 12/5 options expiration date): +$1,460.00
+($185.00 strike price - $177.70 stock purchase price) * 200 shares
1. Total Net Profit Potential (close at the unchanged purchase price of $177.70 per share on the 12/5 options expiration date): +$900.66
= (+$898.66 option income + $2.00 dividend income - $0.00 capital appreciation)
2. Total Net Profit Potential (If 200 NVIDIA shares assigned at the $185.00 strike price on the 12/5 options expiration date): +$2,360.66
= ($185.00 strike price - $177.70 purchase price) x 200 shares + $900.66 Call options premium = $1,460.00 + $900.66
1. Potential Absolute Return-on-Investment (If 200 NVDA shares closing price is unchanged at the original purchase price of $177.70 per share on the 12/5 options expiration date): +2.6%
= +$900.66/$34,641.34
Potential Annualized Return-on-Investment (If 200 NVIDIA shares closing price is unchanged at the original $177.70 stock purchase price on the 12/5 options expiration date): +67.8%
= (+$900.66/$34,641.34) * (365/14 days)
2. Potential Absolute Return-on-Investment (If 200 NVIDIA shares assigned at the $185.00 strike price on the 12/5 options expiration date): +6.8%
= (+$2,360.66/$34,641.34)
Potential Annualized Return-on-Investment (If 200 NVIDIA shares assigned at the $185.00 strike price on the 12/5 options expiration date): +177.7%
= (+$2,360.66/$34,641.34) * (365/14 days)
= (+$2,360.66/$34,641.34) * (365/14 days)
