NVIDIA (NVDA) Might Be a UFO!
Everyone keeps talking about Nvidia's chips and when I tried them they weren't very edible, but they could be a UFO! But first...
What's the Word on the Street?
The August jobs report released this morning before the bell and showed a weaker-than-expected labor market. The estimated amount of jobs created last month was expected to be 75,000, but it was actually 22,000. That's a pretty big difference and initially the market rallied off of that. The rationale was that the Fed would have no choice but to cut interest rates. But after more thought, investors decided it was actually not good and could mean that the economy is slipping into recession.
NVIDIA (NVDA)
What Is It?
NVIDIA Corp. engages in the design and manufacture of computer graphics processors, chipsets, and related multimedia software. It operates through the following segments: Graphics Processing Unit (GPU) and Compute & Networking. The Graphics segment includes GeForce GPUs for gaming and PCs, the GeForce NOW game streaming service and related infrastructure, Quadro and NVIDIA RTX GPUs for enterprise workstation graphics, virtual GPU, or vGPU, software for cloud-based visual and virtual computing, automotive platforms for infotainment systems, and Omniverse Enterprise software for building and operating metaverse and 3D internet applications. The Compute & Networking segment consists of Data Center accelerated computing platforms and end-to-end networking platforms including Quantum for InfiniBand and Spectrum for Ethernet, NVIDIA DRIVE automated-driving platform and automotive development agreements, Jetson robotics and other embedded platforms, NVIDIA AI Enterprise and other software, and DGX Cloud software and services. The company was founded by Jen Hsun Huang, Chris A. Malachowsky, and Curtis R. Priem in April 1993 and is headquartered in Santa Clara, CA. The listed name for NVDA is NVIDIA Corporation Common Stock.
Why Is It a Possible UFO?
Primarily its current share price relative to its fair value is the reason NVDA could be a UFO.
What About Recent News?
Broadcom won a deal with OpenAI worth $10 billion and is attempting to challenge NVDA's dominance in AI hardware. The Chinese government has been dissuading domestic companies from buying Nvidia chips. And the U.S. government recently struck a deal to take 15% of any chips sold to China.
Despite the bad news, the stock has been in a rut and there could be an opportunity for a trade.
What's the Current Price?
NVDA has had a great run for quite a while. But the stock is down ~7% on the month and ~8% on the week. On the day the stock is down ~3%.
What’s the Fair Value?
Analyst fair values ratings for NVDA
I’d first like to emphasize that fair value is subjective. Many analysts at many banks and institutions rate stocks differently and assign fair value in their own unique way. So, what I like to do is take all the recent fair values since the most recent earnings report and average them. In this case…
Since NVDA's most recent earnings report on 08/27/2025, it has received 14 ratings and taking the average, the fair value might be somewhere around: $217.36.
12 ratings are a Buy, 1 is a Hold, and the Morningstar rating is unknown. The lowest price target is $195, while the highest is $245.
What Do Options Traders Expect?
Puts are trading over equidistant Calls, which means traders think there is a chance to the downside. You can see because… forget about the green columns and focus on the red. Notice how on the right side for the $150 Put it says $2.43, it’s $2.03 for the equidistant Call at $185.
The premium (the credit you receive for executing the trade) is currently more for selling Puts, as opposed to selling Calls. Basically because of that, option traders expect the stock to go down, rather than up.
Note: When I originally placed this trade, the premiums were reversed with traders expecting the stock to go up. By the time I took this screenshot, it had turned against me. That's ok! It's just one indicator.
How About Volatility?
The IV rank (the purple line) for NVDA (stock price in blue) is currently hovering around 8.76, which is pretty low (IV rank goes from 0-100). This makes short strategies (which are what I prefer) less attractive.
What's the Trade?
My preferred trade is a variation of the wheel without the rolling, AKA cash-secured puts. I typically like to target stocks that offer a dividend and are below fair value.
Why a dividend? If the trade results in assignment and I’m on the hook for X amount of shares, I can at least be satisfied knowing I picked a (hopefully under fair value) company that will pay me a small amount while I run the other side of the trade AKA covered calls.
NVDA does offer a dividend with a small yield of 0.02%.
It’s a fairly low-risk strategy (all options trading is risky!), that has a higher probability of success, but requires a higher amount of collateral.
So if you saw the most recent image above, I already STO (sold to open) 1 contract of the $150 Put for the October 17th expiration. I like to have a DTE (Days To Expiration) that is around ~45 days.
When the trade reaches 50% profit I will buy it back. I don’t like to be greedy and go for more profit, because I would rather not waste my time being in a trade for too long.
What About Alternative Trade Ideas?
- If the collateral requirement is too high, another idea is a put credit spread. You would sell a put at a strike below the current share price and then buy a put at a lower strike than the put you sold. By doing so, you will avoid the collateral requirement of a cash-secured put, but the credit received will be smaller. Also, if the trade goes sideways, you will not be assigned shares so no collecting dividends and running covered calls afterwards.
- Just invest! 1 share or even fractional shares are a way to get a foothold in a stock that you think might increase in value.
Completed Trade
Dino Silvestro
BTC with 50% profit
Dino Silvestro
Assigned, will run covered calls soon!
Wait…Where Are the Candlesticks? And All the Other Indicators?
I know many traders love their candlesticks and a ton of indicators. I prefer simplicity. Candlesticks aren’t necessary unless you’re the kind of trader that wants to try and pick the perfect moment to execute a trade, and even then it’s not a sure thing.
As for indicators, there are a ton. Some of them work sometimes. None are perfect. I don’t want to get bogged down with too many. You’ll drive yourself crazy looking at too many of them, so find a handful you like and stick with those.
Disclosures
- I currently have an open trade with NVDA (as mentioned in this post).
- No trade is a sure thing. There is always risk involved.
- This blog post is not meant to take the place of financial advice, but hopefully acts as a guide for learning or informational purposes.