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A curious dynamic is happening in shares of Nvidia ahead of two potential catalysts this month, and it's presenting an unique opportunity for options traders. As shares of the AI giant have surged, the stock's forward multiple, a measure of how expensive it is relative to the market, has fallen as the chip maker continues to rake in money.
Also falling? The price of Nvidia options.
Nvidia shares have rallied 24% in 2026, rising five straight sessions with the stock sitting just 3.5% below its all-time closing high of $235.74 back in May. However, several potential catalysts in the days ahead may reverse or accelerate Nvidia's trajectory from here. According to CNBC, Nvidia CEO Jensen Huang is expected to attend a state dinner for Chinese President Xi Jinping when he travels to Washington to meet with President Trump this Thursday. AI is expected to be a main topic of discussion when Xi meets with Trump. Then September 30, the following week, Micron is expected to report fiscal Q4 earnings, a barometer for AI memory demand that may have ripple effects on Nvidia.
Nvidia, YTD
Despite these potential catalysts and Monday's volatility among prominent chip names, Nvidia's option prices are unusually cheap. Nvidia's implied volatility, derived from current options prices, is sitting near its lowest level of the past year. That basically means the market isn't pricing in much movement over the coming weeks, and options prices are lower to reflect that. For options traders anticipating a large move in Nvidia, either because of Nvidia-specific catalysts or near-term shifts in the semiconductor sector, those options can now be traded at a discount relative to the past year.
Trade: Buying the Oct 16 210/220 put spread and the Oct 16 235/245 call spread, for a total debit of roughly $4.86
This is a reverse iron condor, a directionally neutral strategy structured to profit from a large move in Nvidia in either direction before October 16th. The core bet is in buying the 220 put and the 235 call, the two strikes closest to Nvidia's current price, which are relatively cheap given Nvidia's low implied volatility. Selling the 210 put and 245 call, each 10 points further from the money, generates a credit that partially finances the trade. This lowers the cost of the trade and increases the position's theoretical probability of profit to ~56%. The max loss of the position is $486, hit if Nvidia remains between $220 and $235 and the long legs expire worthless. The max gain is $514 on either side, realized if Nvidia closes at or beyond $210 on the downside or $245 on the upside. Breakevens sit at $215.14 and $239.86, meaning Nvidia needs roughly a 5% to 6% move from current levels by October 16th for the trade to turn a profit.
The semiconductor sector has a proven, recent history of moving fast. This was on display Monday, when AMD surged more than 9% to cross a $1 trillion market cap and Intel and Arm each jumped double digits on renewed enthusiasm for AI chip demand. With cheap options, a stock sitting near its highs, and multiple catalysts still ahead, this setup is an example of how to use options for positioning into anticipated volatility.
As with any defined risk options spread, consider closing this position out before expiration rather than holding into settlement to avoid potential assignment risk.
