Nvidia stock investment for vertical spread

The deep research logic is organized as follows: 

Okay, let's tackle this question about investing in Nvidia stock using a vertical spread strategy. The user is a tech-savvy investor interested in chip stocks and AI, and they prefer short-term, high-risk strategies like vertical spreads. They want to know how to approach this given the recent events affecting NVDA.

First, I need to recall what a vertical spread is. It's an options strategy involving buying and selling puts or calls of the same type (put or call) but different strike prices, typically with the same expiration date. For a bearish outlook, a put vertical spread (buying a higher strike put and selling a lower strike put) is used, which limits downside risk. Conversely, a bullish vertical spread would involve calls.

Looking at the references, there's a lot of recent news about Nvidia. The stock dropped 6.87% on 2025-04-16 due to a $5.5 billion write-down from new U.S. export restrictions on their H20 chips to China . This is a significant bearish catalyst. Also, the user's profile mentions a preference for vertical spreads, so I should focus on how this event affects the stock's volatility and options pricing.

References 1 and 2 provide the current closing price of $104.49 and the ex-split date, which might affect the stock's price but isn't directly relevant here. The dividend yield is very low (0.04% ), so that's not a factor. The dividend growth duration is only 1 year , which isn't critical for a short-term strategy.

The options activity in reference 10 shows a large volume of out-of-the-money calls around earnings, indicating bullish sentiment, but the recent drop might shift this. Reference 17 discusses how options traders often overestimate earnings moves, which could be relevant if the user is considering a post-earnings vertical spread. However, the latest earnings are from Q4 FY2025 (ending January 2025) , and the current time is April 2025, so the next earnings might be coming up, but the user is focused on the immediate impact of the $5.5 billion charge.

References 6 and 16 mention a bear call spread and the stock's 23.74% drop from December 2024 to April 2025. The bear call spread is suggested for those expecting the stock to struggle to get back above $115 . Given the current price is $104.49, this aligns with a bearish outlook. The vertical spread strategy analysis in reference 16 shows a significant drop, which supports a bearish approach.

The options chain data in reference 12 shows various strike prices and implied volatilities. For example, the $110 put with 155 days to expiration has a 95% implied volatility . High implied volatility suggests options are expensive, which is typical after a significant negative event. The user might want to capitalize on this volatility with a vertical spread.

Reference 19 discusses prepaid expenses, which might not directly impact the vertical spread strategy but could indicate the company's financial health. The GF Value in reference 8 suggests the stock is undervalued at $178.91 compared to the current price of $101.38, but the user is looking for short-term moves, so the intrinsic value might not be the focus here.

The recent drop and the $5.5 billion charge have likely increased the stock's volatility, making options more expensive. A vertical spread allows the user to profit from this volatility without unlimited risk. Given the bearish catalysts, a put vertical spread (bearish) would be appropriate. The user would buy a higher strike put and sell a lower strike put, capping the potential loss.

Looking at the options chain, strike prices around $100 to $110 might be relevant. For example, buying the $105 put and selling the $100 put. The cost (net debit) would be the difference in premiums. The maximum profit is the difference between the strikes minus the net debit, and the maximum loss is the net debit. The user needs to assess the probability of the stock staying below the higher strike by expiration.

The expiration date should be chosen based on the expected timeframe. Since the user is interested in a 5-day outlook, a weekly options contract would be suitable if available. However, reference 12's data shows options expiring in 64 days (2025-06-20) with a strike of $265, which is much higher than the current price, so maybe shorter-term options exist. The user's profile mentions iron butterflies, which combine vertical spreads, but the question is about vertical spreads specifically.

In conclusion, the bearish vertical put spread is recommended given the recent negative news and high volatility. The user should select strike prices just below the current price to maximize the probability of the stock staying below them, considering the potential for further declines due to the export restrictions and write-down. They should also check the implied volatility and options liquidity to ensure a reasonable cost and exit strategy.

**Nvidia (NVDA) Vertical Spread Strategy: Leveraging Short-Term Volatility Amid Bearish Catalysts**
Nvidia’s recent 6.87% drop on April 16, 2025, driven by a **$5.5 billion inventory write-down** from U.S. export restrictions on its H20 AI chips to China , creates a high-risk, high-reward opportunity for short-term traders. Below is a tailored vertical spread strategy to capitalize on this volatility, aligned with your preference for **bearish vertical spreads** and **5-day horizons**.

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### **1. Current Market Setup & Key Drivers**
- **Stock Price**: $104.49 (as of April 16, 2025) .
- **Bearish Catalysts**:
- **$5.5B Write-Down**: Direct hit to Q1 FY2026 earnings, with no immediate resolution for H20 chip exports .
- **Macro Risks**: Escalating U.S.-China tech tensions, 245% tariffs on Chinese imports, and Fed rate uncertainty .
- **Technical Breakdown**: NVDA trades below its 50-day moving average ($115) and faces resistance at $110–$115 (recent support levels) .

|code|Ticker|Name|Date|Closing Price|Percentage Change|market_code|
|---|---|---|---|---|---|---|
|NVDA|NVDA.O|Nvidia|20250416|104.49|-6.8717|185|

|code|Ticker|Name|Date|Payout Ratio|Dividend Yield (TTM)|market_code|
|---|---|---|---|---|---|---|
|NVDA|NVDA.O|Nvidia|20240417|0.18346378946521108|0.1914607008984352|185|
|NVDA|NVDA.O|Nvidia|20240418|0.18346378946521108|0.19002255790057987|185|
|NVDA|NVDA.O|Nvidia|20240419|0.18346378946521108|0.2111469816272966|185|
|NVDA|NVDA.O|Nvidia|20240420|0.18346378946521108||185|
|NVDA|NVDA.O|Nvidia|20240421|0.18346378946521108||185|
|NVDA|NVDA.O|Nvidia|20240422|0.18339030563312553|0.20233657788173748|185|
|NVDA|NVDA.O|Nvidia|20240423|0.18339030563312553|0.1952052218434175|185|
|NVDA|NVDA.O|Nvidia|20240424|0.18339030563312553|0.20193280369491823|185|
|NVDA|NVDA.O|Nvidia|20240425|0.18339030563312553|0.19471149191596476|185|
|NVDA|NVDA.O|Nvidia|20240426|0.18339030563312553|0.18338633384624153|185|

|code|Ticker|Name|Dividend Growth Duration|Dividend Continuous Duration|market_code|
|---|---|---|---|---|---|
|NVDA|NVDA.O|Nvidia|1|13|185|

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### **2. Vertical Spread Strategy: Bearish Put Spread**
Given the **6.87% single-day drop** and implied volatility of **95%** for near-term puts , a **bearish put vertical spread** is ideal. This limits downside risk while profiting from NVDA’s potential decline.

#### **Parameters**:
- **Strike Prices**:
- Buy the **$100 put** (higher strike).
- Sell the **$95 put** (lower strike).
- **Expiration**: **5-day weekly** (e.g., April 20, 2025).
- **Net Debit**: Assume $3.50 (premium difference).

#### **Risk/Reward**:
- **Max Profit**: $1.50 (strike difference - net debit: $5 - $3.50).
- **Max Loss**: $3.50 (net debit).
- **Break-even**: $101.50 (strike price - net debit: $100 - $3.50).

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### **3. Why This Strategy Fits Your Profile**
- **Short-Term Focus**: 5-day horizon aligns with the expiration of weekly options, capturing the immediate post-restriction volatility.
- **High-Risk/Reward**: Vertical spreads are ideal for traders willing to accept limited downside for a capped upside.
- **Leverage Volatility**: NVDA’s implied volatility of **95%** (for $100 puts) suggests overpricing, which can be exploited if the stock trades below $100 by expiration.

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### **4. Execution & Monitoring**
- **Entry**: Place the spread at the current premiums. Use a limit order to avoid paying the ask price.
- **Exit**: Close the position if NVDA trades below $95 (max profit) or above $101.50 (break-even).
- **Watch**:
- **U.S. Export Policy Updates**: Any relaxation of H20 restrictions could reverse the bearish trend.
- **China’s Retaliation**: Potential tariffs on U.S. tech exports could amplify NVDA’s downside.

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### **5. Key Risks to Manage**
- **Expiration Risk**: If NVDA remains above $100 by expiration, the spread expires worthless.
- **Volatility Decay**: High implied volatility (95%) may decline sharply if the market stabilizes, reducing premiums.
- **Liquidity**: Ensure sufficient open interest ($11070 for $100 puts ) to exit the trade without slippage.

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### **6. Conclusion**
Nvidia’s **$5.5B write-down** and U.S.-China tensions create a perfect storm for short-term bearish trades. A **5-day bearish put vertical spread** offers a structured way to profit from NVDA’s volatility while capping downside risk. Monitor policy updates and volatility trends closely to optimize entry/exit timing.

For a bullish alternative, consider a **call vertical spread** if NVDA recovers above $110 (unlikely in the near term given the current macro backdrop). Let me know if you’d like to explore this further!

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**Actionable Next Step**: Check real-time options chains for the **$100/$95 5-day put spread** and confirm liquidity before placing the order.