The number one stock that has the biggest risk to my investing portfolio is Nvidia. This is because I owned 1600 shares of Nvidia, which are all on Covered CALL contracts and 14 SELL PUT contracts that are on USD256k worth of margins. The SELL PUT contracts were opened as a rectification to my mistake of selling naked CALL options on Nvidia, which was clocking more than USD141k of unrealized losses as Nvidia’s share price continued to rise.
Further read here:
Nvidia Timebomb Defused! | How I Fix My Broken Naked Nvidia CALL Options Trades | How To Repair Naked CALL Option
All the previous mistakes seem to be rectified with the above strategy, as long as Nvidia maintained it’s share price or go up higher. However, the rise of DeepSeek sparked fear that Nvidia may soon face issues selling its high-end GPU chips and crashed Nvidia’s shares by 17% in a single day. On my same day, my excess liquidity dropped by more than 20k!
Read more here:
Nvidia Crashed….So Did My Liquidity…. What I Did To Rectify The Issue
If Nvidia’s share price continues to fall, then soon my portfolio will run out of (excess) liquidity and I would be force to liquidate my positions, which would be a disaster as some positions have huge unrealised losses.
So, I decided to do a bearish strategy on Nvidia.
I reversed the above strategy of SELL CALL -> SELL PUT (bullish) and converted some of my SELL PUT contracts into SELL CALL. The advantage of doing so is that I gained some excess liquidity as I reduced the margins needed for my SELL PUT contracts. The disadvantage is that I became naked on my SELL CALL contacts, i.e. SELL CALL contracts not backed by actual shares.
[30 Jan 25] Added VST Shares, Turn NVDA SELL PUT into SELL CALL
I also sold off 100 shares of Nvidia after news came out that Donald Trump was going to impose huge tariffs on Canada and Mexico, as well as tariff on the chips.
[3 Feb 25] Sold Nvidia Shares In Pre-Market
At this time of writing, I have a shortfall of 700 Nvidia shares.
My Outlook On Nvidia
I personally think Nvidia’s future is not as bright as before because if DeepSeek, the Chinese AI LLM, can achieve ChatGPT standards with the small fraction of the cost and inferior chips, then corporation will stop buying the high-end chips like Blackwell, which is going to hurt Nvidia’s revenue.
The recent earnings call by Meta and Microsoft, 2 of Nvidia’s biggest customers, also revealed that they are cutting their AI data spending from 2026 onwards, further adding to the concerns that Nvidia’s growth is going to slow down in the future.
If the AI story is not as rosy as it seems, then the share price will start to fall when investors are disappointed. This has happened recently in 2022 when Nvidia had a sharp rise due to huge demand of GPUs for crypto mining and gaming, only to fall later when supply outweigh demand. The same thing may happen if Nvidia’s high end chips’ supply are catching up with its demand. If China manages to produce their cheap GPU and go into mass production, like what they did in the EV market, then that would be the last straw that broke the camel’s back for Nvidia.
Looking Forward
I know from past experience that there is a certain amount of risk with a naked share position. Thus, I will adopt a few strategies to manage the risk:
- I can sacrifice (increase) some liquidity by turning the SELL CALL back to SELL PUT
- I can slowly buy Nvidia shares back to reduce my naked position
- I can also buy LEAPS CALL as a hedge
- I can close the SELL CALL contracts if it gets low enough
Concluding Thoughts
I think the market is going to be very volatile as Trump’s administration starts and big changes would be made, which would inevitably rock the market. The impending trade war is a classic example and there will be more to come. The market will correct further due to fears of recession, inflation and the Fed increasing the interest rates again. I will trade with extreme caution and be ready to run when I sense that things are not looking great for my portfolio. I will share all my trades on the same day via my Patreon page so you can follow me there if you need to know my updates first hand.
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I wish you success in your investing journey and may you avoid the many pitfalls that I have encountered in my journey (read my previous articles on the all the major mistakes that I have made in this journey) and please exercise caution in volatile times are now. Do proper risk management and not let emotions (fear/ greed) get the better of you. All the best!
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