Nvidia just released its Q2 financials for FY ’26, and the results were nothing short of explosive. Revenue exceeded the $45-billion guidance from last quarter, hitting $46.7 billion – up 56% year over year. Gross margins were within expectations, and operating expenses were lower than anticipated. Finally, net income surged 59% YOY and 41% QOQ to $26.4 billion, rounding out another successful quarter for the world’s most valuable company.
And yet.
The market met the news with a lukewarm reception at best, and NVDA is down 1.77% in premarket trading.
So what do investors do now? Many speculate this pause is an excellent buying opportunity – perhaps even the last chance to ride NVDA’s rocket before it reaches a $5 trillion market cap.
On the other hand, some are saying AI stock valuations are untenably stretched and are calling this the first signs of a market-wide pullback.
I’m afraid only time will tell.
But the good news is, whichever side of the fence you’re leaning more towards, there’s a perfect options strategy for that. And better yet, with earnings in the rear-view mirror, investors can take advantage of lower option premiums thanks to post-earnings volatility compression.
So, let’s get started.
First, let’s go over the definitions, but we’ll skip the “right but not obligation” part. I’m sure you’ve seen that before. But, if you want to know more, do check out our handy Options Learning Center.
The gist of today’s strategy is to be able to profit whether Nvidia stock goes up or down. We do this by buying both a call and put – each a single-legged option that can be used as a directional bet on the underlying asset.
You pay a premium to buy calls when you expect the stock to go up, and puts if you think it’ll go down.
When done together, it’s called a Long Straddle – and you get the potential to profit no matter what. That’s why the Long Straddle is called a neutral options trading strategy.
Several advantages make options a better alternative to buying a stock outright. The first, of course, is the leveraged exposure at a lower entry price. Instead of buying 100 shares at full price, you’re buying control of and exposure to 100 shares for a fraction of the cost. There’s also the hard cap on losses, which are limited to your initial investment and nothing more.
Now, when trading options, it’s always a good idea to be mindful of the contract’s life, or the expiration. The expiration dictates many things – the rate at which time decay eats into your premium, how sensitive the contract is to volatility, whether your thesis has enough runway to play out, and how much you get to sell your option when you decide to close out the trade.
To make all these details crystal clear, let’s jump into Barchart and pick out a call and put on NVDA. First, go to Barchart.com, then search for Nvidia. Once on the Stock Profile Page, click the Straddles & Strangles option on the left-hand navigation bar.
Then, you’ll be presented with a list of default Long Straddle trades:
Now, let’s talk strike prices, breakeven prices, and expiration dates.
The strike price is the agreed-upon price point where the option buyer can buy (for calls) or sell (for puts) the underlying asset. If you’re buying a call, you want NVDA stock to exceed your strike price by expiration. For puts, you want the stock to trade below it.
The breakeven prices (where red turns to green) indicate the point at which your trade will start becoming profitable. To get the breakeven price for long calls, just add the premium to your strike price. For long puts, subtract. Barchart gives you the breakeven prices to the upside (BE+) and to the downside (BE-). If the stock ends above the BE+ or below BE- at expiration, you earn a profit.
Meanwhile, the expiration date indicates the duration of the contract. For the long straddle, I like to set my expiration dates at least 30 days or more out, to give my thesis ample time to play out.
I’ll now set my expiration to October 3, 2025 – which is 37 days from this writing.
Now, remember what I said about low option prices? That stems from the fact that volatility, a significant driver of options premiums, goes down after earnings are released. We can confirm this by clicking the Profit/Loss Chart button on the upper-right corner of the results page and checking the Volatility Tab.
Investors can take advantage of cheaper premiums by buying at-the-money NVDA calls and puts, depending on their outlook, with at least 30 days to expiration. The trade I’d like to highlight today is the 180 long straddle expiring Oct 3, 2025.
If you think NVDA is going for a $5 trillion market cap soon, or sentiment will turn sour, you can buy this 180-strike long straddle for $19.70 a share, or $1,970.
The breakeven point to the update is $199.70, and $160.30 to the downside.
If NVDA trades above $199.70 or below $160.30 within the next 37 days, the trade will move into a profit. The farther it moves beyond either breakeven point, the greater the potential upside.
As a plus, if you sell both options while there’s still time to expiration, you’ll benefit from additional extrinsic value on top of your potential profit.
Of course, if you strongly believe NVDA only has one way to go, up or down, then you might as well just pick either a long call or put and call it a day.
Nvidia’s blockbuster quarter reminds everyone about the company’s dominance in AI. That said, the market’s muted reaction leaves us all guessing what’s next. A long straddle allows traders to profit from a big move in either direction, without having to pick a side. While options aren’t cheap, post-earnings volatility compression gives traders a window to position more cost-effectively. For those who believe Nvidia’s next move will be big, up or down, the long straddle may be the smartest way to play it.
On the date of publication, Rick Orford did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com