Nvidia $270 in a Year?
The day after Buffett trimmed, someone bought 143,000 $NVDA 20250620 265.0 CALL$ - June 20, 2025 expiry with $265 strike for $7.45 million in premium.
This implies a forecast of Nvidia trading at least $270 (265 + 5.2) a year from now.
But looking at the option chain, this prediction may actually be conservative.
The highest strike listed for that June 20, 2025 expiry is capped at $265.
As those familiar with GME's prior squeeze know, available strikes aren't determined by demand, but by exchanges assessing the trend before listing further out strikes.
On the Monday of GME's ramp, strikes only went to $55. Exchanges then added $85 on Tuesday and $125 on Wednesday to keep up.
So when were the $265 strikes for Nvidia added?
Judging by 265 strike trading across all expirations, they were newly listed this past Monday, June 17th.
Then the very next day, someone went all-in buying $7.45 million worth of those new 265 calls.
Contrasting sharply with GME, where the $125+ calls were heavily sold into on the first day of listing.
LEAPS Pros & Cons
LEAPS stands for Long-Term Equity Anticipation Securities - referring to long-dated options, typically 9 months out or more. True LEAPS are 2+ years to expiration.
Besides longer-dated, they function similarly to standard options. But the extended timeframe creates 3 key differences:
Higher time premium
Lower liquidity
Need for outsized volatility
The first two are straightforward - further expiries mean richer time values and thus higher premiums paid. With expiration so far out, trading interest is lower, reducing liquidity and widening bid/ask spreads.
But the killer is the last point - to overcome the high premiums paid, the actual move in the underlying needs to be massive relative to the expected move priced in. This is often the undoing of LEAPS buyers, getting crushed by probabilistic pricing models factoring in routine volatility.
Rationally analyzing that NVDA 265 LEAPS trade, it checks basically every negative box. For any other stock, it'd be a guaranteed $7.45 million down the drain.
But this being Nvidia, the only relevant question is whether to join in.
Ownership > Leverage
For most retail investors, simply owning Nvidia shares trumps any option strategies.
As an option-focused commentator, I should push option strategies first. But for revolutionary stocks like Nvidia, holding shares is far more crucial than any leveraged fancy footwork.
Currently, the most prudent move is a stock/put/call combined position - selling puts to collect premium while potentially putting more shares, selling calls to potentially trim, but maintaining a core long equity position through the cycles.
During major bull runs, out-of-the-money put sales can't keep up with share gains. At-the-money puts are viable but surprisingly few have the stamina to manage them properly.
Outright call buying is fringe, with most flipping in just a day or two rather than sizing up for a real run.
While that NVDA 265 LEAPS trade outlines an aggressive speculative approach, I'd simply use it as inspiration to stick with your equity position through volatility. If trying it yourself, be prepared for 80% drawdowns.
The key is striving to stay invested over the full cycle, using whatever strategy allows you to stick it out most comfortably.
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