Nvidia's recent decline has reset its stock price to around $200, a significant technical support level where buyers have previously stepped in. This pullback has also increased options premiums, making it an attractive time for investors to consider selling defined-risk put options rather than buying the stock at its recent highs.
The company's fiscal first-quarter revenue surged 85% year-over-year, with Data Center revenue up 92%, indicating robust demand for AI infrastructure. Management's guidance suggests non-GAAP gross margins will approach 75%, reinforcing the strength of AI-related demand.
Despite these positive fundamentals, Nvidia's stock trades at a discount compared to the semiconductor industry average, which may reflect market concerns about a potential slowdown that has not yet materialized in Nvidia's performance.
The stock's current valuation, combined with elevated implied volatility, presents a compelling opportunity for a defined-risk put spread, particularly if the $200 support level holds. The strategy involves selling a July 31, 2026, $200 put and buying a $185 put, allowing for a maximum reward of $538 per contract if Nvidia remains above $200 at expiration.
This approach limits risk while positioning for Nvidia's continued leadership in AI infrastructure as it expands its product offerings beyond GPUs to complete AI systems