How Much Monthly Income Can You Actually Earn Selling NVDA Covered Calls?

Selling covered calls on NVIDIA (NVDA) can generate roughly $300 to $900 per contract per month in 2026, depending on the strike you choose and how far out you sell. That works out to an annualized premium yield of approximately 3% to 10% on the stock's current value, before any capital gains or dividends. The exact number moves with NVDA's implied volatility — and NVDA carries some of the highest implied volatility of any mega-cap stock, which is what makes it attractive for covered-call writers.

These are not projections or promises. They are estimates based on observed option chain data for NVDA trading near $115 to $125 per share in early 2026. Actual premiums will shift as the stock price, earnings calendar, and broader market volatility change.

Why NVDA Premiums Are Unusually High Right Now

Implied volatility (IV) is the engine behind option premiums. When IV is high, sellers collect more. NVDA's 30-day implied volatility has historically ranged from 45% to over 80% during earnings periods — compared to roughly 20% to 30% for a stock like MSFT. That gap matters a lot.

The CBOE tracks implied volatility across the market. When you look at NVDA's option chain, you are seeing the market's collective bet on how much the stock will move. Higher expected movement means higher premiums for sellers. NVDA benefits from this because it sits at the center of the AI infrastructure story, which keeps analyst attention — and volatility — elevated.

One practical consequence: a 30-day at-the-money call on NVDA might pay 3x to 4x what the same structure on a lower-volatility stock like Coca-Cola would pay. That is the opportunity. The flip side is that NVDA can also move 3x to 4x as much, which is the risk.

A Worked Example: Selling a Monthly NVDA Covered Call in 2026

Let's run the numbers with a concrete example.

**Setup:** You own 100 shares of NVDA. The stock is trading at $120.00 per share. Your total position value is $12,000.

**The trade:** You sell one NVDA call option with a $125 strike price expiring in approximately 30 days (one standard monthly expiration cycle). The option is roughly 4% out of the money (OTM). You collect a premium of $4.20 per share, or $420 per contract (one contract = 100 shares).

**Three outcomes at expiration:**

1. NVDA stays below $125. The option expires worthless. You keep the full $420 premium and still own your 100 shares. You can sell another call next month.

2. NVDA rises to exactly $125. The option expires at the money. You still keep the $420 premium. Your shares are not called away.

3. NVDA rises above $125 — say to $135. Your shares are called away at $125. You receive $12,500 for the shares plus the $420 premium, for a total of $12,920. But you miss the gain from $125 to $135, which would have been worth $1,000 if you had simply held the stock. This is the core trade-off of covered-call writing.

**Monthly yield calculation:** $420 premium divided by $12,000 position value = 3.5% for the month. Annualized, that is roughly 42% — but that number is misleading because you cannot compound it perfectly every month. A realistic annualized yield after accounting for months where the stock runs past your strike (and you miss upside) is closer to 8% to 14% on the position, based on historical NVDA option data.

**If you want more premium:** Move the strike closer to the current price. A $122 strike (2% OTM) might pay $5.80 per share, or $580 per contract. But now your shares get called away if NVDA moves just $2 higher.

**If you want more upside room:** Move the strike further out. A $130 strike (8% OTM) might pay $2.10 per share, or $210 per contract. You keep more potential stock gain, but you collect less income.

What Are the Real Risks of This Strategy?

Covered calls are considered one of the more conservative options strategies. FINRA and the Options Industry Council (OIC) both classify covered calls as a Level 1 options strategy — the lowest risk tier — because your maximum loss is limited to the stock falling to zero, minus the premium you collected. You cannot lose more than you would lose just holding the stock.

But that does not mean the risks are small. Here are the three you need to take seriously:

**1. Capped upside.** NVDA is a stock that can move 15% to 25% in a single month around earnings. If you sold a $125 call and NVDA jumps to $145, you are locked out of $20 per share in gains. You collected $4.20 but gave up $20. That is a painful trade-off, even though you technically made money.

**2. The stock can still fall hard.** The premium you collect provides a small cushion — in our example, $4.20 per share. But if NVDA drops from $120 to $90, you lose $30 per share on the stock, offset only by the $4.20 premium. Covered calls do not protect you from a serious drawdown.

**3. Earnings volatility is a wild card.** NVDA reports earnings roughly every 90 days. In the days before earnings, implied volatility spikes — which means premiums look very attractive. But the stock can move 10% to 20% in either direction after the report. Many experienced traders avoid selling calls right before an NVDA earnings announcement, or they use wider strikes and accept lower premiums.

The OIC recommends that investors fully understand assignment risk before selling any covered call. Assignment can happen early (before expiration) if the option goes deep in the money, though this is uncommon for standard equity options.

How Taxes Work on NVDA Covered Call Premiums

In the United States, the IRS treats covered call premiums as short-term capital gains in most cases, regardless of how long you hold the stock. The premium is not taxed when you receive it — it is taxed when the position closes (either the option expires, you buy it back, or your shares are called away).

There is an important wrinkle for long-term holders. If you own NVDA shares that have appreciated significantly and you have held them for more than 12 months, selling a covered call can affect your holding period for long-term capital gains treatment. Specifically, if you sell a call that is "in the money" or close to the money, the IRS may suspend your holding period clock while the call is open. This is a qualified covered call rule. Consult a tax professional before selling calls on shares you are protecting for long-term capital gains treatment.

For Canadian investors, the Canada Revenue Agency (CRA) treats covered call premiums as either income or capital gains depending on the frequency of trading and your intent. Active traders may have premiums taxed as business income. The CRA has published guidance on options taxation, and Canadian investors should review it or consult a tax advisor.

One practical note: selling covered calls inside a tax-advantaged account (like a Roth IRA in the US or a TFSA in Canada) eliminates the immediate tax drag on premiums. Many retail covered-call traders use these accounts specifically for this reason.

How to Decide Which Strike and Expiration to Use Each Month

There is no single right answer, but here is a practical framework that many retail covered-call traders use.

**Delta as a guide:** Delta tells you roughly the probability that the option expires in the money. A 0.30 delta call has approximately a 30% chance of being exercised. Most income-focused traders target the 0.20 to 0.35 delta range — far enough OTM to have a good chance of expiring worthless, close enough to collect meaningful premium. For NVDA near $120, that typically means strikes in the $124 to $128 range for a 30-day expiration.

**Expiration length:** 30-day (monthly) expirations are the most popular for covered-call income because theta decay — the rate at which an option loses time value — accelerates in the final 30 days. You collect premium most efficiently in this window. Some traders use weekly expirations on NVDA, which exist and are liquid, but they require more active management.

**Earnings awareness:** Check NVDA's earnings date before selling. If earnings fall within your expiration window, implied volatility will be elevated — meaning higher premiums — but so will the risk of a large move. Many traders either skip the earnings cycle or sell a strike far enough OTM to survive a moderate post-earnings move.

**Position sizing:** The OIC and most brokerage education resources recommend that no single covered-call position represent more than 5% to 10% of your overall portfolio. NVDA is a volatile stock. Sizing appropriately protects you from a single bad month wiping out several months of premium income.

Is Selling Covered Calls on NVDA Right for You?

Covered calls on NVDA work best for investors who already own the stock, believe in its long-term direction, and are willing to accept a ceiling on monthly gains in exchange for consistent premium income. If you are a pure growth investor who wants to capture every dollar of upside, covered calls will frustrate you — especially in a strong bull market for AI stocks.

If you are a long-term NVDA holder looking to generate 3% to 5% additional monthly income on a position you plan to hold anyway, the strategy can make a lot of sense. The key discipline is consistency: selling calls month after month, managing strikes thoughtfully around earnings, and not abandoning the strategy after one bad month where the stock runs past your strike.

Before you start, make sure your brokerage account is approved for options trading. In the US, FINRA requires brokers to assess your options knowledge and financial situation before granting options approval. Most major brokers — Fidelity, Schwab, TD Ameritrade, Interactive Brokers — offer covered-call approval at their lowest options tier. The application takes a few minutes and is typically approved within one business day.

How much can I realistically make selling covered calls on NVDA each month?

Based on 2026 option chain data with NVDA near $120, a 30-day covered call at a strike 3% to 5% out of the money typically generates $300 to $580 per contract (100 shares). That is a monthly yield of roughly 2.5% to 4.8% on the position value. Actual premiums vary with implied volatility, which shifts daily.

What happens to my NVDA shares if the stock shoots up past my strike price?

If NVDA closes above your strike price at expiration, your 100 shares will be called away at the strike price — this is called assignment. You keep the premium you collected, but you miss any gains above the strike. You can then decide whether to buy NVDA shares again and restart the strategy.

Should I sell NVDA covered calls before earnings?

Premiums are highest right before earnings because implied volatility spikes, but so is the risk of a large post-earnings move that blows past your strike. Many experienced traders either skip the earnings cycle entirely or use a strike far enough out of the money to survive a 10% to 15% move. There is no universally right answer — it depends on your risk tolerance.

Are covered call premiums on NVDA taxed as ordinary income?

In the US, the IRS generally taxes covered call premiums as short-term capital gains when the position closes, not when you receive the premium. If you hold long-term appreciated NVDA shares, selling certain calls can suspend your long-term holding period under the qualified covered call rules. Consult a tax professional for your specific situation.

What strike price and delta should I use for NVDA covered calls?

Most income-focused covered-call traders target a delta between 0.20 and 0.35, which corresponds to roughly a 20% to 35% probability of the option expiring in the money. For NVDA near $120, that typically means strikes in the $124 to $128 range for a 30-day expiration. Lower delta means less premium but more room for the stock to run.

Can I sell NVDA covered calls inside my IRA or TFSA?

Yes. In the US, covered calls are permitted inside a Roth IRA or traditional IRA at most major brokers, and premiums grow tax-deferred or tax-free depending on the account type. Canadian investors can sell covered calls inside a TFSA, where premiums are generally sheltered from tax, though the CRA has specific rules on frequent trading that may reclassify gains as business income.