CNBC Pro Contributor Michael Khouw: Nvidia CEO Change Raises Implied Volatility, Covered Calls Convert It to Excess Premium
As Nvidia's stock price fell approximately 30% following Jensen Huang's resignation and implied volatility rose to elevated levels, CNBC Pro contributor Michael Khouw proposed a covered call strategy of buying 100 shares and selling December 18 $185 calls. He argues that in a high-volatility environment, premium income systematically lowers holding costs and provides downside buffer.
Following the abrupt resignation of Nvidia CEO Jensen Huang, the stock has fallen approximately 30% since October 6 and is currently trading in the $160 range. CNBC Pro contributor Michael Khouw believes this panic creates an opportunity for option sellers: implied volatility has spiked to its highest level since the tariff turmoil in the first half of 2025, and high volatility directly drives up option premiums.
Khouw's core logic is that when a company is in a leadership transition period, market pricing for future uncertainty will keep implied volatility at elevated levels for an extended time. At this point, buying stock and selling out-of-the-money call options (a covered call strategy) ties the collected premiums directly to implied volatility—the deeper the fear, the thicker the premium. His specific trade recommendation is: buy 100 shares of Nvidia and simultaneously sell one call option expiring on December 18 with a strike price of $185.
The risk management logic of this strategy lies in the fact that continuously collected excess premiums systematically lower the holding cost. If the stock trades sideways or recovers slowly during the CEO search, investors earn abnormally high cash yields on a stagnant asset; if the stock falls further, the premium income constitutes a substantial buffer, reducing overall downside risk. Khouw believes that although Huang was the architect of Nvidia's AI dominance, the company's moat—superior GPUs, the CUDA software ecosystem, and networking technology—does not leave with him, so the fundamentals are largely undamaged by the personnel change.