Generate income with Nvidia earnings: Strategic options approaches

Key points:

• Nvidia earnings are out this week: Nvidia (NVDA) is set to release its Q4 FY2025 earnings on February 26, 2025 after market-close. Analysts project a 72% year-over-year revenue growth and a 62% increase in EPS growth, driven by Nvidia's dominance in AI-driven computing and data centers.

• Earnings bring volatility: Nvidia's earnings releases often cause significant price swings. Historically, NVDA has experienced double-digit percentage moves post-earnings, presenting both risks and opportunities for investors.

• Options strategies can generate income: Investors can use options strategies to generate income from Nvidia's earnings volatility. Two such strategies are covered calls and cash-secured puts.

Nvidia (NVDA) is set to release its Q4 FY2025 earnings on February 26, 2025, after market close. Given Nvidia’s dominance in AI-driven computing and data centers, investors anticipate strong results, with analysts projecting 72% year-over-year revenue growth and a 62% jump in EPS growth. However, earnings events often bring heightened volatility, and Nvidia is no exception.

Why earnings volatility matters for investors

Earnings releases can cause significant price swings in high-growth stocks like Nvidia. In previous quarters, NVDA has experienced double-digit percentage moves in either direction post-earnings. This creates both risk and opportunity for investors.

Rather than passively holding through this volatility, options strategies allow investors to generate income, whether they expect NVDA to rise or decline slightly after earnings.

Options strategies to generate income from Nvidia earnings

1. Covered Call: Get paid while holding NVDA

If you own Nvidia shares and expect moderate upside (or limited movement) after earnings, selling a covered call lets you generate extra income while holding the stock.

Example: Nvidia covered call strategy

• Stock price: $130 (Pre-earnings estimate)

• Sell a 10-day (expiry March 7) $133 call for $650 per contract 

Potential outcomes:

• Stock stays below $133: You keep the full premium ($650) as profit.

• Stock rises above $133: Your shares are called away at $133, but you keep the premium, effectively selling at $139.50 ($133 + $6.50 premium).

This strategy works best if you are willing to cap your upside in exchange for guaranteed income.

2. Cash-Secured Put: Get paid to potentially buy NVDA at a discount

If you want to buy Nvidia at a lower price, selling a cash-secured put lets you collect income upfront while waiting for a potential dip.

Example: Nvidia cash-secured put strategy

• Stock price: $130 (Pre-earnings estimate)

• Sell a 10-day (expiry March 7) $128 put for $655 per contract 

Potential outcomes:

• Stock stays above $128: You keep the premium ($655) without buying shares.

• Stock drops below $128: You must buy NVDA at $128, but with the premium received, your effective cost is $121.45 ($128 - $6.55) per share.

This is ideal for long-term investors who are comfortable buying Nvidia at a lower price while generating income in the meantime.

Key takeaways

• Earnings bring volatility, creating opportunities to generate income with options.

• Covered calls are great for income if you hold Nvidia shares and expect limited upside.

• Cash-secured puts generate income while setting a lower buy price for NVDA.

By using strategic options approaches, long-term investors can maximize returns while managing risk around Nvidia’s earnings.