Using Options Around Nvidia’s August 26th Earnings Announcement

NVDAA calendar spread, the mechanics behind it, and the way it ends

TRADE EXECUTED AUGUST 12, 2026. Quotes shown are August 12 midpoints, pending final execution data. Frontwater Capital and accounts it manages hold positions in Nvidia.

Nvidia reports second-quarter earnings after the close on Wednesday, August 26.

It’s a high-quality company that we happily own in our actively managed portfolios, and it remains one of the clearest long-term beneficiaries of what we see as a multi-year AI build-out. Demand for advanced semiconductors is strengthening, not fading, and Nvidia continues to lead the most attractive sector in the market.

Despite that backdrop, investors still misread the stock’s valuation. Less than three weeks ago, on July 29, Nvidia traded at a three-month low of $190, a level at which it changed hands at under 22 times forward earnings, against roughly 26 times for Coca-Cola.

The comparison has limits, but it illustrates something we see repeatedly. Investors misjudge value on perception rather than on arithmetic. Nvidia has had such a good run over the last couple of years that the stock simply started to feel expensive, regardless of the fact that on this one measure it was cheaper on paper than a company that sells soft drinks.

This article is about something narrower: an options structure built entirely around the calendar and the earnings date. The idea is simple. We sell the pre-earnings options expiring August 21 and buy the longer-dated options expiring August 28, aiming for the short leg to decay toward zero while the long leg holds its value.

The structure is called a calendar spread. Sell the expiry with no event in it, own the expiry that holds the event, and let the calendar do the work.

Why the calendar is the whole argument

The August 21 contracts expire before Nvidia reports. Whatever premium they carry is almost entirely time value, and time value must be gone by that Friday’s close.

The August 28 contracts expire two days after the report. The catalyst that makes them expensive is still ahead of them, so their premium has a reason to persist.

Nothing here requires a view on Nvidia’s quarter, its guidance, or how the market reacts to either. It requires the week of August 17 to 21 to stay uneventful.

A basic example

Assume Nvidia is trading at $223.

Puts	Price	Net
Sell 1 · August 21 · 215 Put	$1.58
Buy 1 · August 28 · 215 Put	$3.88
Net debit		$2.30

Calls	Price	Net
Sell 1 · August 21 · 230 Call	$2.34
Buy 1 · August 28 · 230 Call	$5.65
Net debit		$3.31

$5.61

Total cost per share
and the most it can lose

$215

Lower edge
of the profit zone

$230

Upper edge
of the profit zone

This version of the calendar spread costs a total of $5.61 per share, or $561 for the structure, and that figure represents the most this trade can lose. That’s the single most useful thing to know about it.

Selling both the August 21 put and the August 21 call means only one of them can ever be assigned, since Nvidia cannot finish below $215 and above $230 on the same day. Assignment risk on the short side is one-sided rather than two-sided. That in itself is somewhat of an edge, and it’s worth knowing before the position is on.

Both short legs expire worthless if Nvidia finishes between $215 and $230 on August 21. Meanwhile the August 28 legs retain value, because they still carry the earnings announcement inside them. The spread captures the difference.

The most important part: the trade ends on August 21

This is the point most descriptions of a calendar spread leave out, and it’s the one that matters most. We do not hold the August 28 options to expiration. We do not hold them through the earnings report. We sell them on Friday, August 21, the same day the short leg expires.

The August 28 options are expensive for exactly one reason: the earnings announcement sits inside them. That premium is at its richest in the days immediately before the report, and it collapses the morning after. The stock gaps, the uncertainty resolves, and implied volatility on that expiry falls from the low 40s to something far lower within minutes of the open. Traders call it the volatility crush, and it happens whether the news is good or bad.

The entire trade is designed to sell that premium at its peak, not to own it through the event.

The sequence

Four phases. By the time Nvidia reports, we hold nothing.

On August 21 the short legs expire worthless, or are bought back if they are close to the strike or deep in the money, to avoid an unwanted assignment over the weekend. On the same day we sell the August 28 legs while their earnings premium is still fully intact.

What happens if you hold on

Hold the August 28 legs past that Friday and the trade quietly becomes something else entirely: a long bet on earnings volatility, purchased at roughly 42% implied vol, with the crush arriving four days later. That’s a different trade with a different risk profile, and it’s not the one we underwrote.

A calendar spread of this kind is a short rental of the earnings premium. The rental ends on August 21.

When the structure works best

Calendar spreads live on the gap between two implied volatilities. The options market isn’t naive. The longer-dated, post-earnings contracts will almost always trade at higher implied volatility, because the market knows the report is coming. The real question is how much higher, and whether that premium survives until you exit.

Nvidia at-the-money implied volatility	Aug 21	Aug 28	Spread
Implied volatility	33.8%	42.2%	+8.4

Bid/ask midpoints sourced from Interactive Brokers, August 12, 2026.

Calendar spreads work best when the two at-the-money implied volatilities are reasonably close. A gap of roughly 8.4 volatility points is close enough for us to justify the trade. There’s no hard threshold here, but the risk is clear: if implied volatility on the shorter-dated options rises faster than on the longer-dated ones, the spread moves against you.

Layering this on top of the Nvidia position

Because we already hold Nvidia in client portfolios, a structure like this sits on top of a position we’re comfortable owning rather than substituting for one. That long-term conviction lets us consider a variant.

Ratioed variant	Price	Cash
Sell 4 · Aug 21 · 215 Puts	$1.58	collect $632
Buy 2 · Aug 28 · 215 Puts	$3.88	pay $776
Sell 2 · Aug 21 · 230 Calls	$2.34	collect $468
Buy 2 · Aug 28 · 230 Calls	$5.65	pay $1,130
Net debit		$806

Bid/ask midpoints sourced from Interactive Brokers, August 12, 2026. Figures exclude commissions.

Note what is and isn’t happening here. The calls remain a straight two-lot calendar, one for one. Only the puts are ratioed: two short August 21 puts for every one long August 28 put, which is another way of saying we’re comfortable owning more Nvidia at $215.

That comfort has a price tag

Two of the four short puts aren’t offset by a long put. They are cash-secured short puts: if Nvidia finishes below $215 on August 21, they commit us to buying 200 shares at $215, or $43,000. The premium collected on that uncovered portion is $316, about 0.7% for nine days of exposure.

That’s a reasonable return for a stock we want to own lower. But it’s a separate, directional, capital-committing decision bolted onto the calendar, not part of it. And it changes the risk profile fundamentally.

The straight version of this structure, two calendars on each side, would cost $1,122 and could not lose a dollar more than that. The ratioed version costs less, $806, precisely because those two extra short puts bring in $316 that the straight version never collects. That $316 is not a discount. It’s payment for taking on the uncapped side.

Anyone running the ratio should be sizing it against the $43,000 commitment, not against the $806 debit.

How this goes wrong: the quiet week isn’t quiet

There is really only one way to lose here, and it wears two faces.

A calendar spread is short near-term movement. Its value peaks near the strikes and falls away on either side. Nvidia’s implied one-week move is about $10.80 on a $223 stock. A move of that size, on its own, walks a meaningful portion of the debit straight out of the position.

The zone the trade needs, against the move the market expects

The structure wants Nvidia between $215 and $230 on August 21.

Implied move derived from at-the-money implied volatility on the August 21 expiry. Illustrative, not a forecast, and not a probability statement. For education, not advice.

That picture is the risk in one line. The move the options market is pricing for the week is wider than the window the trade needs, on both sides. Nothing unusual has to happen for the position to come under pressure. An ordinary week is enough.

And the week only looks empty. Nvidia trades on hyperscaler capex commentary, export-control headlines, supplier prints, competitor guidance, and sell-side surprises, none of which appear on any calendar. That’s the second face of the same risk. Even without a large price move, front-month implied volatility can jump on a headline, and because the position is short volatility on the August 21 leg, a spike there compresses the very gap the trade depends on.

The market isn’t charging 33.8% for that week by accident. It’s charging it because the quiet week isn’t always quiet, and when it isn’t, this structure is on the wrong side of it.

The bottom line

Nvidia’s earnings premium is real, it’s measurable, and it sits in a highly active, liquid options market. The structure pays if Nvidia drifts through the week of August 17 to 21 without a headline and we sell the August 28 options on that Friday, five days before the report. It loses if a headline lifts front-month volatility.

It never asks anyone to predict earnings, guidance, or market reaction. It lives on the calendar and the spread, two of the few things an investor gets to see in advance.

Jeff Kaminker, CFA, CFP, FRM · President, Frontwater Capital Inc.

Important information

This publication is produced by Frontwater Capital for educational and informational purposes only. It is not investment advice, an offer or solicitation to buy or sell any security, or a recommendation of any strategy for any particular investor.

Options involve significant risk and are not suitable for all investors. Multi-leg strategies carry additional risks including early assignment on short legs and execution risk across legs. Ratioed structures with uncovered short options can lose more than the premium paid. Investors should read the Characteristics and Risks of Standardized Options before trading.

Option quotes, implied volatilities and the underlying price shown are bid/ask midpoints sourced from Interactive Brokers on August 12, 2026, are illustrative, and will change. Figures exclude commissions. Probability and implied-move estimates are derived from implied volatility and are not forecasts. Frontwater Capital and accounts it manages hold positions in Nvidia. Positions may change at any time without notice.

Past performance is not indicative of future results. Please speak with your portfolio manager before acting on anything discussed here.