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Control the Stock for a Fraction of the Cash. Here's the Catch.

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ticker lesson

Breakdown

0:00NVDA· ticker

Nvidia — stock vs call cost comparison

  • Stock at $198/share requires $9,900 for 100 shares
  • Call option 170 strikes at 83 delta
  • In-the-money call costs 1/3 stock price
  • Delta measures stock-equivalent exposure
2:17lesson

Call spread as stock replacement

  • Long 170 call + short 205 call reduces risk
  • Delta drops from 82 to 54
  • Theta shifts to +$15/day
  • Capital requirement reduced 66%
4:24lesson

Intrinsic vs extrinsic value

  • 170 call has $374 extrinsic vs $3.05 put
  • Interest rates inflate call premiums
  • Zero rates equalize put/call extrinsic
  • Extrinsic = volatility + interest
6:53lesson

Interest rate impact on options

  • Positive rates increase call value
  • Extrinsic value = $3.83 for 170 call
  • Offset with front-month short calls
  • Interest cost embedded in premiums

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