How to Make a 2.0% Yield Over the Next 3 Weeks - Shorting OTM Nvidia Puts

Shorting out-of-the-money Nvidia Inc (NVDA) put options with 3-week expiry periods can provide a 2% yield. That is due to elevated premiums and NVDA stock's flat performance.

NVDA is at $138.05 in midday trading on Friday, Jan. 17. It's been trading flat with some volatility for the past three months. 

For example, on Oct. 18, three months ago, NVDA closed at $138.00 - essentially where it is today.

That has kept its put options premiums high, ideal for cash-secured put yield plays.

I discussed this play in my Dec. 23 Barchart article, “Nvidia Short Put OTM Yields are Over 2.5% for Less Than One Month to Expiry.”

At the time, NVDA was at $137.97, close to today's price, and I discussed selling short the $132.00 put option strike price for a premium of $4.10. The expiration date is today.

That provided the cash-secured put short seller an immediate yield of 3.10% (i.e., $4.10/$132.00 = 0.031). Moreover, the $130 strike price puts had a premium of $3.45. That could have provided a cash-secured put yield of 2.654%.

Since NVDA stock is well over these strike prices today, it looks like they will expire worthless. In other words, the stock has stayed flat over the last 3 weeks, but the short seller made money.

This can be repeated today, as it is usually best to roll over a play like this by covering the trade with an order to “Buy to Open." Since the cost is only a few pennies (i.e., $1 or $2 per contract shorted).

Shorting OTM NVDA Puts Again

Good yield opportunities still exist. For example, look at the Feb. 7, 2025, expiration period - three weeks from now. It shows that the $133.00 strike price has a bid-side premium of $2.85 per put contract.

That means that a cash-secured short-put option play has a yield of 2.14% (i.e., $2.85/$133.00 = 0.02143).

Here is how that works. An investor first secures $13,300 in cash or buying power with the brokerage firm. That acts as collateral if NVDA stock falls to $133.00 on or before Feb. 7. That would mean the account would be assigned to buy 100 shares at $133.00 - i.e., $13,300.

Then the account will immediately receive $285.00 in income. That works out to an immediate yield of 2.14% of the $13.3K invested per put contract shorted.

Note that this also accumulates. Including the prior 2.85% from the previous short, plus the other short plays that I have discussed, an investor can build more income. That works well for existing investors in NVDA stock.

Moreover, as I have shown in prior articles, NVDA stock could be worth more than today's price. That is why shorting out-of-the-money (OTM) puts here is a good way to set a lower buy-in price target for new investors.