Nvidia (NVDA) is a Leaderboard stock that flashed an early buy signal with a strong break above the 50-day moving average.

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Traders who are willing to bet that Nvidia stock will stay above 830 for the next couple of weeks or so could look at a bull put spread trade.

As a reminder, a bull put spread is a defined-risk strategy, so you always know the worst-case scenario in advance.

This type of trade will profit if Nvidia stock trades sideways or higher and even sometimes if it trades slightly lower.

With Nvidia stock trading around 877, if we use the May 10 expiration, we can sell an 830 put and buy an 825 put for around $1.30.

Selling this spread would generate roughly $130 in premium. The maximum risk is $370.

Nvidia Stock Option Trade Could Return 35%

If the spread expires worthless, that would be a 35% return in 10 days, provided Nvidia stock is above 830 at expiration.

The maximum loss would occur if Nvidia stock closes below 825 on May 10. That would see the premium seller lose $370 on the trade.

The break-even point for the trade is 828.70. That’s calculated as 830 less the $1.30 option premium per contract.

I would set a stop loss if the loss is equal to the amount of premium received. In this case, it would be $130.

Exit Strategy For Nvidia Stock Trade

Sticking to this stop loss level will help avoid large losses if the trade goes south.

According to the IBD Stock Checkup, Nvidia stock is ranked No. 1 in its group and has a Composite Rating of 99, an EPS Rating of 99 and a Relative Strength Rating of 98.

Please remember that options are risky, and investors can lose 100% of their investment.

This article is for education purposes only and not a trade recommendation. Remember to always do your own due diligence and consult your financial advisor before making any investment decisions.

Gavin McMaster has a Masters in Applied Finance and Investment. He specializes in income trading using options, is very conservative in his style and believes patience in waiting for the best setups is the key to successful trading. Follow him on X/Twitter at @OptiontradinIQ

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