The Short Answer: What Works on NVDA This Week

If you already own 100 shares of NVIDIA (NVDA) and want to collect income this week, selling a slightly out-of-the-money (OTM) weekly call — roughly 3% to 5% above the current stock price — is the most common starting point for covered-call traders. At a recent NVDA price near $875, that puts you in the $900–$920 strike range for the nearest Friday expiry, where bid premiums have been running $8–$15 per contract depending on market conditions.

That single contract covers 100 shares and pays $800–$1,500 upfront. The trade-off: if NVDA closes above your strike on Friday, your shares get called away at that price. You keep the premium either way.

Why NVDA Is Both Attractive and Dangerous for Covered Calls

NVIDIA carries some of the highest implied volatility (IV) among large-cap US stocks. High IV inflates option premiums — great for sellers. But it also means the stock can move 5%–10% in a single session. That gap risk is real and must be priced into your decision before you sell.

The CBOE tracks NVDA's 30-day implied volatility regularly above 50% annualized, compared to roughly 15%–20% for the S&P 500 (SPY). More IV means fatter premiums, but it also signals the market expects big moves. You can collect a larger check, but you face a higher chance of either watching the stock rocket past your strike — capping your upside — or seeing shares drop sharply while you hold a losing position.

Bottom line: NVDA covered calls are not a conservative, low-drama strategy. They suit traders who are comfortable owning NVDA long-term and can absorb short-term volatility.

How to Build the Trade: A Step-by-Step Worked Example

Let's walk through a concrete example using round numbers close to recent market conditions.

**Setup** - You own 100 shares of NVDA, purchased at $800 per share. - Current NVDA price: $875. - You want to sell a covered call expiring this Friday (5 days out).

**Choosing the Strike** Look at the $910 strike — about 4% OTM. The bid on that call is $10.50. You sell one contract (100 shares) and collect $1,050 in premium, credited to your account immediately.

**Three Possible Outcomes at Expiry**

1. NVDA closes below $910. The call expires worthless. You keep all $1,050 and still own your shares. Your effective cost basis drops to $789.50 per share ($800 minus $10.50).

2. NVDA closes exactly at $910. Same result — call expires worthless or you buy it back for pennies. Full premium kept.

3. NVDA closes above $910 — say at $940. Your shares are called away at $910. You receive $91,000 for 100 shares plus the $1,050 premium, for a total of $92,050. You miss the extra $30 per share ($3,000) that you would have earned by holding. That missed gain is the real cost of the strategy.

**Annualized Yield Check** $1,050 on a $87,500 position (100 shares × $875) over 5 days = 1.2% in one week. Annualized, that's roughly 62% — but you cannot repeat that every week without taking on assignment risk repeatedly. A realistic monthly target for disciplined NVDA covered-call writers is 2%–4% of position value.

Picking the Right Expiry: Weekly vs. Monthly

NVDA offers weekly options expiring every Friday, plus standard monthly expirations on the third Friday of each month. Here is how to think about the choice.

**Weekly expirations** give you faster theta decay — the time-value erosion that benefits option sellers. A 5-day option loses its time value quickly in the final days. You also reset your position more often, which lets you adjust strikes week to week. The downside: transaction costs add up, and you spend more time managing the trade.

**Monthly expirations** (21–30 days out) offer higher absolute premiums per contract and are the sweet spot recommended by the Options Industry Council (OIC) for most retail covered-call writers. More time means more premium, but you are locked in longer if the stock moves against you.

A practical rule: if you are new to NVDA covered calls, start with a 21-day monthly expiry at a delta of 0.25–0.30. That delta range means the market prices roughly a 25%–30% chance of the call finishing in the money — a reasonable balance between premium income and keeping your shares.

Risks You Need to Understand Before You Sell

Covered calls are considered one of the lower-risk options strategies — FINRA and the SEC both classify them as a defined-risk trade because your maximum loss is simply the stock falling to zero (minus the premium you collected). But 'lower risk' does not mean 'no risk.' Here are the three risks that bite NVDA traders most often.

**1. Capped upside on a fast-moving stock.** NVDA has gained 20%+ in a single week multiple times. If you sold a $910 call and the stock jumps to $970, you are legally obligated to sell at $910. You made money — but far less than you would have by just holding.

**2. Assignment before expiry.** American-style options (which NVDA options are) can be exercised early. Early assignment is rare on OTM calls but can happen on in-the-money calls, especially around ex-dividend dates. The OIC notes that early assignment is most likely when the call has little time value left and the stock is deep in the money.

**3. The stock drops and you still own it.** The premium you collected softens the blow but does not eliminate it. If NVDA falls from $875 to $780, your $1,050 premium covers only $10.50 per share of that $95 drop. You are still down significantly on the position. Covered calls do not hedge a large downside move.

Tax Treatment: What the IRS and CRA Say

Tax rules for covered calls are easy to get wrong, and the consequences can be expensive.

**US traders (IRS rules):** Premium you collect when selling a covered call is NOT taxed when you receive it. It is taxed when the position closes — either when the call expires worthless, when you buy it back, or when your shares are called away. If the call expires worthless, the premium becomes a short-term capital gain in the year of expiration, regardless of how long you held the stock. The IRS also has 'qualified covered call' rules under IRC Section 1092 that affect whether your holding period on the underlying stock is suspended while the call is open. If your call is too deep in the money, the IRS may suspend your long-term holding period on the shares. Consult a tax professional before selling deep ITM calls on shares you have held less than a year.

**Canadian traders (CRA rules):** The Canada Revenue Agency treats covered-call premiums as capital gains in most cases for investors (not traders). However, if the CRA classifies your activity as a business — based on frequency, intent, and leverage — premiums may be treated as ordinary income. The distinction matters because capital gains are 50% included in income, while business income is fully taxable. CRA Interpretation Bulletin IT-479R covers securities transactions in detail. Again, consult a tax professional if you are writing calls frequently.

The practical takeaway: keep records of every trade, every premium received, and every closing transaction. Your broker's year-end statement is a starting point, not the complete picture.

A Quick Checklist Before You Place the Trade

Run through these five checks before selling any NVDA covered call.

1. **Earnings date.** NVDA reports quarterly earnings, and IV spikes dramatically before the announcement. Selling a call that spans an earnings date means you collect more premium but face a much larger potential move. Check the earnings calendar first.

2. **Position size.** One contract = 100 shares. Make sure you actually own at least 100 shares before selling. Selling a call without owning the shares is a naked call — an entirely different, much riskier strategy that requires higher margin approval from your broker.

3. **Strike selection.** Use the delta as your guide. A delta of 0.20–0.30 is a common starting range for OTM covered calls. Most brokers display delta in their options chain.

4. **Bid-ask spread.** NVDA options are highly liquid, so spreads are usually tight (a few cents to $0.20). Always use a limit order at or near the midpoint of the bid-ask spread. Never use a market order on options.

5. **Exit plan.** Decide in advance: will you let the call expire, or will you buy it back if it reaches 50% of the premium you collected? Many experienced traders close at 50% profit to free up capital and reduce risk. This is sometimes called the '50% rule.'

What strike price should I sell for a covered call on NVDA this week?

A common starting point is 3%–5% above the current stock price, which puts you in the out-of-the-money range with a delta around 0.20–0.30. At a recent NVDA price near $875, that means looking at the $900–$920 strikes for the nearest Friday expiry. The exact strike depends on how much premium you want versus how much upside you are willing to give up.

How much premium can I collect selling a covered call on NVDA?

Premium varies with implied volatility, days to expiry, and how far OTM your strike is. In recent market conditions, a 5-day OTM call on NVDA has been paying roughly $8–$15 per share ($800–$1,500 per contract). Monthly calls 21–30 days out typically pay more in absolute terms, often $20–$40 per share depending on IV levels.

What happens if NVDA shoots past my strike price after I sell the call?

Your shares will be called away at your strike price, and you keep the premium you collected. You miss any gains above the strike — that is the main cost of the strategy. For example, if you sold the $910 call and NVDA closes at $960, you sell at $910 and miss $50 per share in additional profit.

Can I sell a covered call on NVDA before earnings?

You can, but implied volatility is much higher before earnings, which inflates the premium you collect. The risk is that NVDA can move 10%–20% on an earnings report, which could either blow past your strike or drop your shares sharply. Many experienced traders avoid selling calls that span an earnings date, or they use wider strikes to give themselves more room.

Is selling covered calls on NVDA considered a safe strategy?

FINRA and the SEC classify covered calls as a defined-risk strategy because your downside is limited to the stock falling — the same risk you already have as a shareholder. However, NVDA is a high-volatility stock, and the premium you collect does not protect you from a large drop in share price. It is best suited for investors who want to hold NVDA long-term and are comfortable with the stock's volatility.

How are covered call premiums taxed in the US and Canada?

In the US, the IRS taxes covered-call premiums as short-term capital gains when the position closes, not when you receive the premium. In Canada, the CRA generally treats premiums as capital gains for investors, but frequent traders may have premiums taxed as ordinary business income. Both US and Canadian traders should consult a tax professional, especially if they are selling calls on shares held less than one year.