**Nvidia’s Earnings Report Approaches** As Nvidia’s earnings release on Wednesday, August 27th, approaches, it’s a critical time for investors. If you’re thinking about short overlays, they can help protect against possible drops caused by earnings reports. To manage risk, set stop-loss and target levels in advance. Beginners should steer clear of complicated strategies like premium selling, as they involve higher risks from potential price swings. It’s essential to plan your exit strategy before investing and ensure your hedging matches your risk tolerance. This way, your portfolio can handle the volatility that often comes with earnings announcements. Nvidia’s stock is currently valued high due to sky-high expectations. Even an outstanding earnings report might not drive the stock higher. Therefore, focusing on risk management is key in the coming weeks, rather than trying to predict the earnings outcome. We’ve seen similar situations before. For example, the stock’s rise leading to the 10-for-1 split last June showed us how volatile things can get. In May 2024, the options market anticipated an 8.5% move, but the stock surged over 9% the next day. This history highlights the importance of being ready for big price swings. For those holding shares, the easiest option is to buy insurance for the week. A protective put limits losses if earnings disappoint, allowing you to maintain your long-term investment without stress. Although there’s a cost for this safety, it helps you avoid worrying about sudden drops in price. **Strategic Approaches Post Earnings Announcement** With options currently expensive due to high implied volatility, considering a collar strategy is wise. By selling an out-of-the-money call option, you can use the premium earned to cover most or all of the cost of the protective put. While this limits your potential gains for the week, it creates a defined price range for the stock during the event. If you think the stock will either rise or remain stable, selling a covered call could be a good approach. This strategy provides immediate income from high option premiums, offering a buffer against a slight price dip. Just be prepared for the possibility that your shares may be sold if the stock rallies past your chosen strike price. After the earnings announcement, the biggest opportunities for derivative traders will arise. Implied volatility often falls sharply—a situation known as “IV crush”—resulting in cheaper options. This is an excellent time to consider selling cash-secured puts or put spreads on any decline, allowing you to collect premiums or buy more shares at a favorable price while benefiting from the lower volatility. Create your live VT Markets account and start trading now.

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