NVIDIA's Volatility Opportunity: A Strangle Strategy for AI's Next Chapter

NVIDIA (NASDAQ: NVDA) stands at a critical juncture: its AI dominance is undeniable, yet near-term earnings risks loom large. With shares trading at $131.28 on May 26, 2025—the day of its Q3 FY2025 earnings report—the market is pricing in volatility, but not despair. For investors, this is a moment to deploy a strangle options strategy, capitalizing on the stock's anticipated post-earnings swing while positioning for NVIDIA's $164.51 price target. Here's why the calculus tilts bullish.
The Near-Term Storm: Margin Pressures and China's Shadow
NVIDIA's Q2 FY2025 results revealed sequential margin declines, with GAAP gross margins slipping to 75.1% from 78.4% in Q1. The $5.5 billion inventory write-down for its H20 GPUs—blocked by U.S. export restrictions—is a stark reminder of geopolitical risks. With China's market off-limits for its top-tier chips, NVIDIA's revenue engine faces a $1.5 billion annualized headwind, according to estimates.
But here's the catch: Blackwell is rising. NVIDIA's new B200 architecture, designed to bypass export constraints, generated $11 billion in Q2 revenue, marking the fastest product ramp in the company's history. This “Blackwell boom” is already offsetting H20 losses, and its integration with AI software (NVIDIA AI Enterprise) and networking gear (Spectrum-X) creates a multi-product flywheel.

Why a Strangle Strategy Wins Here
The strangle—a low-cost options strategy involving buying out-of-the-money puts and calls—exemplifies how to profit from volatility while hedging downside risk. NVIDIA's implied volatility of 7.8% suggests a post-earnings swing of ±10.3 points (based on its May 26 close of $131.28). This aligns with the key price range of $120.77–$138.13, where support and resistance levels could trigger momentum shifts.
The Play:
- Buy a $120 put (20% below current price) to hedge against a China-related earnings miss or broader tech selloff.
- Buy a $145 call (10% above the price target) to capture upside if Blackwell's ramp accelerates or AI adoption surges.
The combined cost of these options—roughly 2–3% of the stock's value—offers asymmetric risk/reward: profits if shares move beyond either strike, while losses are capped at the premium paid.
The Long-Term Case: NVIDIA's AI Supremacy
Behind the noise of quarterly swings lies NVIDIA's unshakable moat. Its CUDA ecosystem, AI-as-a-service model, and partnerships with cloud giants (Microsoft, Amazon) ensure it's not just a GPU supplier but the operating system of AI. The $5.5 billion write-off is a speed bump, not a detour.
Consider this: NVIDIA's Q3 FY2025 revenue guidance of $32.5 billion (+45% YoY) already factors in H20 headwinds. The company's non-GAAP margins are holding steady at 75%, buoyed by Blackwell's higher ASPs and software recurring revenue. Meanwhile, its $50 billion share repurchase authorization signals confidence—investors should too.
The Bottom Line: Time to Strangle the Market's Fears
NVIDIA's AI narrative is too powerful to be derailed by near-term noise. The strangle strategy allows investors to embrace volatility rather than fear it, while targeting a $164.51 price point that reflects Blackwell's full potential.
The call is clear: act now. Deploy this options strategy ahead of earnings to lock in gains while hedging against uncertainty. NVIDIA's future isn't in China's banned H20 chips—it's in the datacenters, labs, and industries that Blackwell will power.
The market's volatility is your ally. Don't let fear hold you back.
Comments
No comments yet