How to sell a covered call on NVDA

The position is two pieces: long 100 NVDA shares and short one call. The short call obliges you to deliver those shares at $215 if the buyer exercises, and you keep the $495 premium no matter what happens. That's the whole trade — you sold the right tail of your own position.

At August 28, 2026 expiry there are three outcomes. Below $215 the call expires worthless and you keep both the shares and the premium. Above it the shares get called away at $215, for a total return of 9.6% from $200.75 including the premium. Exactly at the strike, you keep everything and a coin flip decides assignment.

Your breakeven on the combined position sits at $195.8 — spot minus the premium collected. That is the only downside protection a covered call gives you: 2.5% of cushion. It is not a hedge.

The risk in a covered call is not the call. It is the 100 shares. Max loss on the structure is $19,580 if NVDA goes to zero, versus $20,075 if you held the shares naked — the premium is the entire difference. Anyone describing this as a "low risk" trade is describing the option leg and ignoring the equity.

NVDA pays no dividend, which removes the classic early-assignment trigger — American calls on non-payers are almost never exercised early because exercising throws away the remaining extrinsic value.

The structural problem with short premium is not the loss rate, it is the loss SIZE. A long run of small wins funded by an occasional large loss looks like skill on a monthly statement and like variance on a five-year one.

The premium is enormous and so is the reason for it. Selling puts on NVDA outside an earnings window is a defensible short-vol trade; selling them through one is underwriting a distribution whose tails you have watched print in real time. If you are running the wheel here, the assignment is not the hypothetical — it is the base case at least once a year, and your basis needs to survive it.

NVDA's Aug 28 strikes are $5 apart near the money (2.49% of spot). On a ladder that wide, "pick the 0.30 delta strike" resolves to whichever rung happens to be closest — sometimes not close at all. 114k contracts of open interest on Aug 28 is deep enough that multi-leg orders fill near mid at retail size. 24 strikes on that expiry — 50% of the board — carry prints that agree with their own implied volatility and hold up across the ladder, and those are the strikes priced here. Enormous volume and open interest; complex structures fill near mid even in size, including through the print.

Skew is inverted: the 25-delta CALL implies 2.1% more vol than the put. That is the market pricing upside risk above downside risk — a squeeze, a takeover rumour, or a crowded short. Selling calls into an inverted skew pays better than usual and is riskier than usual for exactly the same reason. The term structure is backwardated — Aug 28 implies 2.9% MORE vol than the following month. That is the signature of a dated event inside the front month, and it is the strongest argument for picking the expiry that sits behind it.

At 46% ATM implied vol, the Aug 28 options are pricing a one-standard-deviation move of $25.16 over 27 days — roughly −12.5% to +12.5%, or $175.59 to $225.91. The structure above sells the part of that distribution the market thinks it will not reach. Whether that is a good trade is entirely a question of whether 12.5% is too much or too little for NVDA over 27 days — the delta table cannot answer that, and neither can we.

The NVDA-specific failure mode: Sizing a short-premium NVDA position off the credit rather than off the gap. The credit is large because the gap is large.