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Nvidia (NVDA) has seen a notable correction, dropping about 16% from its recent highs before Wednesday’s big rally.
While some traders might panic at the sight of double-digit declines, this kind of movement is far from unprecedented for this stock. Back in July and August, Nvidia experienced a 35% correction, and even before that, we saw an over 40% drop during a broader market pullback.
These swings might look extreme, but they present opportunities for those who know how to navigate them.
Here’s how I’m approaching this: I’m ready to take the assignment if Nvidia’s price closes below $130 this week, which it was flirting with before today.
If that happens, I’ll own 100 shares and use covered calls to turn this into a consistent income trade. My goal?
Generate $5 to $10 per share, even if Nvidia goes sideways or dips further. This isn’t just about waiting for a recovery — it’s about actively managing the position to lower my cost basis and maximize gains.
For example, if I can lower my cost basis to $120 per share and Nvidia rebounds to $130 or higher, I’ll lock in a solid return. And if the stock trades sideways, I’ll still collect premium from selling calls, creating a reliable income stream.
It’s not flashy, but it works.
Looking at Nvidia’s broader setup, we’re in correction territory — down over 10% from recent highs — but this is far from a bear market. Stocks in the Technology sector (XLK), especially leaders like Nvidia, tend to see volatility as the market adjusts to growth expectations.
Nvidia remains at the forefront of the semiconductor industry and a key player in the Magnificent Seven, so I’m not worried about its long-term trajectory.
Technically, Nvidia is nearing its 200-day moving average, which I mentioned back on Dec. 10 would likely come into play before the stock hits new all-time highs. This level often acts as a dynamic support zone, and I’m watching it closely for a potential bounce.
If Nvidia can stabilize and start climbing back toward $140 or $150 — today’s 4% bounce, dead cat or not, already has it over $135 — this correction could turn into an ideal entry point for long-term investors.
Now, let’s talk about the repair trade.
If I end up holding Nvidia at $130, I’ll sell calls aggressively to capture premium and lower my cost basis. I’m not trying to squeeze every last penny out of this trade — I’m aiming for consistency. If NVDA hits $140, I’ll be happy with the income generated from the position.
The bottom line?
Nvidia’s correction is an opportunity, not a crisis. Whether it’s through selling premium, lowering cost bases, or riding the rebound, this stock offers plenty of ways to profit. You just have to stay patient — and a little tactical.
I’ll see you in the markets.
Chris Pulver
Chris Pulver Trading
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*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.
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The profits and performance shown are not typical. We make no future earnings claims, and you may lose money. The trades expressed are from historical back-tested data from June 2022 through April 2024 combined with Chris’s live money trading from June 2024 through December 15, 2024, to demonstrate the potential of the system. The win rate is 89.9%, and the average winning trade during the backtested data was 14.3%, while the average losing position was 65.3%.
