NVDA bull put spread: credit, risk, strikes

You are still selling downside — just not all of it. The long $180 put cuts the tail off below that level, which is why this needs $745 of buying power instead of the $19,000 a cash-secured put would tie up.

Above $190 at August 28, 2026, both puts expire worthless and you keep the full $255. Below $180, you lose the maximum $745. Breakeven is $187.45.

Return on risk is 34% for 27 days — 463% annualized. That headline is the reason people prefer spreads to cash-secured puts, and the reason spreads blow up accounts: the same capital supports several times the notional risk.

The risk is leverage, not the structure. $745 per spread is small; the temptation to sell ten of them because the buying power allows it is how a 70%-win-rate trade produces a losing year.

Early assignment on the short leg leaves you long 100 shares plus a long put — a synthetic call, not a disaster, but a position you did not choose and one that requires $19,000 of cash on Monday.

Liquidity is a risk, not a convenience. The moment you most want out of a short-premium position is the moment the spread is widest, and the exit price you modelled at mid will not be available.

The premium is enormous and so is the reason for it. Selling puts on NVDA outside an earnings window is a defensible short-vol trade; selling them through one is underwriting a distribution whose tails you have watched print in real time. If you are running the wheel here, the assignment is not the hypothetical — it is the base case at least once a year, and your basis needs to survive it.

NVDA's Aug 28 strikes are $5 apart near the money (2.49% of spot). On a ladder that wide, "pick the 0.30 delta strike" resolves to whichever rung happens to be closest — sometimes not close at all. 114k contracts of open interest on Aug 28 is deep enough that multi-leg orders fill near mid at retail size. 24 strikes on that expiry — 50% of the board — carry prints that agree with their own implied volatility and hold up across the ladder, and those are the strikes priced here. Enormous volume and open interest; complex structures fill near mid even in size, including through the print.

Skew is inverted: the 25-delta CALL implies 2.1% more vol than the put. That is the market pricing upside risk above downside risk — a squeeze, a takeover rumour, or a crowded short. Selling calls into an inverted skew pays better than usual and is riskier than usual for exactly the same reason. The term structure is backwardated — Aug 28 implies 2.9% MORE vol than the following month. That is the signature of a dated event inside the front month, and it is the strongest argument for picking the expiry that sits behind it.

At 46% ATM implied vol, the Aug 28 options are pricing a one-standard-deviation move of $25.16 over 27 days — roughly −12.5% to +12.5%, or $175.59 to $225.91. A short-premium structure here is a bet that 12.5% over 27 days is more than NVDA will actually use. That is the thesis, stated honestly.

The NVDA-specific failure mode: Sizing a short-premium NVDA position off the credit rather than off the gap. The credit is large because the gap is large.