The Short Answer: Yes, But Know What You're Giving Up

Selling a covered call on NVDA before earnings can generate unusually high premium income because implied volatility spikes ahead of the report. However, if NVDA gaps up sharply after earnings — which it has done multiple times in recent years — your shares get called away at the strike price and you miss every dollar of that move above it. That trade-off is the whole game here.

Why Implied Volatility Makes NVDA Earnings Calls So Tempting

Options prices are driven largely by implied volatility (IV). The higher the IV, the more premium a seller collects. NVDA routinely sees IV rank climb above 80 in the week before its quarterly earnings report, meaning options are priced for a large move in either direction.

For context, a standard at-the-money covered call on NVDA might fetch $4–$6 in a quiet week. In the days before an earnings release, that same strike can command $15–$25 or more in premium, depending on the stock price and time to expiration. That's the IV premium — the market's way of pricing in uncertainty.

The Options Industry Council (OIC) describes this dynamic clearly: elevated IV before binary events like earnings inflates option prices, and that inflation collapses almost immediately after the announcement. This collapse is called IV crush, and it works in the seller's favor — unless the stock moves far enough to overwhelm it.

Worked Example: Selling a Covered Call on NVDA Before Earnings

Let's say NVDA is trading at $875 per share one week before its earnings report. You own 100 shares. You decide to sell one covered call contract.

You choose the $920 strike expiring in 8 days — just past the earnings date. The premium is $18.50 per share, or $1,850 for the contract (100 shares).

Here are the three outcomes:

1. NVDA drops or stays flat after earnings. The call expires worthless. You keep the full $1,850 premium. Your cost basis on the shares drops by $18.50 per share. This is the best-case scenario for the covered call seller.

2. NVDA rises moderately to $910. The call still expires worthless because the stock didn't reach $920. You keep the full premium and still hold your shares with an unrealized gain.

3. NVDA gaps up to $970 after a blowout report. Your shares are called away at $920. You collect $920 per share plus the $18.50 premium — a total effective sale price of $938.50. But you miss the $50 move from $920 to $970. That's $5,000 in forgone gains on 100 shares.

Scenario 3 is the one that stings. NVDA has posted single-day moves of 15–25% after earnings in recent quarters. At $875, a 20% move puts the stock at $1,050 — well above any reasonable strike you'd sell. The premium you collected looks small against that backdrop.

The Real Risks — And They're Not Small

Covered calls are often marketed as low-risk income strategies, and relative to naked options they are. But before earnings, the risk profile shifts in ways that matter.

Capped upside on a volatile stock. NVDA is one of the most volatile large-cap stocks in the market. Its earnings reactions have been extreme in both directions. Capping your upside with a covered call before earnings means you're accepting a fixed maximum gain in exchange for premium — right at the moment when the potential move is largest.

Downside is fully yours. The covered call does not protect you if NVDA drops 15% after a disappointing report. Your $1,850 in premium offsets only $18.50 per share of a decline. If the stock falls from $875 to $743 (a 15% drop), you're down roughly $113.50 per share net of premium. The call simply expires worthless and you're left holding a stock that's down significantly.

Early assignment risk. If NVDA surges and your call goes deep in-the-money before expiration, there is a small but real chance of early assignment, especially if the call has little time value remaining. FINRA and the OIC both note that American-style equity options — which NVDA options are — can be exercised at any time before expiration. Early assignment forces you to sell shares at the strike price immediately, which can create unexpected tax events.

Tax consequences. In the US, if your NVDA shares are called away, the sale triggers a capital gain or loss. The premium received is included in the proceeds. If you've held the shares less than a year, that's a short-term gain taxed as ordinary income. The IRS has specific rules around covered calls and qualified covered call status that can affect the holding period of your underlying shares — consult IRS Publication 550 or a tax advisor before trading. Canadian investors should review CRA guidance on options taxation, as the treatment of premiums and capital gains differs from US rules.

How to Choose the Right Strike and Expiration

Strike selection before earnings is a balancing act between premium collected and the probability of assignment.

Delta as a guide. Delta approximates the probability that an option expires in-the-money. A 0.20 delta call has roughly a 20% chance of being in-the-money at expiration. Before earnings, many traders use a 0.15–0.25 delta strike to collect meaningful premium while keeping assignment probability lower. On NVDA at $875, a 0.20 delta call might sit around the $930–$950 strike range depending on IV.

Expiration timing matters. You have two choices: expire before earnings or expire after. Expiring before earnings means you capture less premium because the IV event hasn't happened yet. Expiring after earnings captures the full IV spike but exposes you to the gap risk described above. Most income-focused traders who want to avoid earnings risk choose an expiration that falls before the report date.

If you want to sell through earnings, consider going further out-of-the-money than you normally would — a 0.15 delta or lower — to give the stock more room to run before your shares get called away. You'll collect less premium, but you reduce the chance of missing a large post-earnings rally.

A Simpler Alternative: Wait Until After Earnings

Many experienced covered call traders skip the pre-earnings window entirely and sell the call the morning after the report. Here's why this can make sense.

After earnings, IV crushes immediately. The uncertainty is resolved, and option prices drop sharply. But the stock has also moved — sometimes a lot. If NVDA jumps from $875 to $960 on earnings, you now own shares worth $960 and you can sell a call at, say, the $1,000 strike for a reasonable premium without capping the upside you already captured.

This approach trades the higher pre-earnings premium for a cleaner, more predictable setup. You avoid the binary risk of a large gap move wiping out your upside. For most retail covered call traders, this is the more conservative and repeatable approach.

The CBOE's research on covered call strategies, including their benchmark BXM index, consistently shows that systematic covered call writing outperforms over time by reducing volatility — not by chasing the highest possible premium in the riskiest windows.

Bottom Line: Is It Worth Selling a Covered Call on NVDA Before Earnings?

It depends entirely on your goals. If you're a long-term NVDA holder who would be comfortable selling your shares at the strike price, and you pick a strike far enough out-of-the-money to survive a moderate post-earnings rally, the elevated premium can be a legitimate income boost.

If you bought NVDA specifically because you expect a big earnings beat and a large price move, selling a covered call before the report directly contradicts that thesis. You'd be collecting $1,850 while giving up the potential for $5,000–$10,000 in gains.

Know which investor you are before you place the trade. The premium is real. The cap on your upside is also real. Both matter.

Should I sell a covered call on NVDA right before earnings?

Only if you're comfortable having your shares called away at the strike price, even if NVDA gaps up significantly. The premium is higher than normal because implied volatility spikes before earnings, but so is the risk of missing a large post-earnings rally. Many income traders prefer to wait until after the report to sell their next call.

What happens to my covered call if NVDA gaps up 20% after earnings?

If NVDA closes above your strike price at expiration, your shares will be called away at that strike. You keep the premium you collected, but you miss all gains above the strike. On a 20% move, that forgone upside can easily be five to ten times larger than the premium you received.

What is IV crush and how does it affect my covered call on NVDA?

IV crush is the sharp drop in implied volatility that happens immediately after an earnings announcement. It causes option prices to fall quickly, which benefits the covered call seller if the stock doesn't move much. However, if NVDA makes a large directional move, that move can more than offset the benefit of IV crush.

Can I get assigned early on my NVDA covered call before expiration?

Yes. NVDA options are American-style, meaning the buyer can exercise at any time before expiration, as noted by the Options Industry Council. Early assignment is most likely when the call is deep in-the-money and has little time value remaining. If assigned early, you must deliver your shares immediately at the strike price.

How does selling a covered call on NVDA affect my taxes?

If your shares are called away, the IRS treats the premium as part of your sale proceeds, which can trigger a capital gain or loss. The IRS also has rules under Publication 550 about qualified covered calls that can affect the holding period of your underlying shares. Canadian investors should check CRA guidance, as options premium taxation differs from US rules.

What strike price should I pick for a covered call on NVDA before earnings?

Most income-focused traders target a delta between 0.15 and 0.25, which gives roughly a 15–25% probability of the call expiring in-the-money. Before earnings, going further out-of-the-money — closer to 0.15 delta — gives NVDA more room to move before your shares get called away, at the cost of collecting less premium.