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AI Stocks and Options Selling: Is It Worth the Risk?

By: MarketMinute

July 25, 2025 at 01:33 AM EDT

Artificial intelligence (AI) has become one of the most exciting and volatile sectors in the stock market. As companies like (NASDAQ: NVDA), (NASDAQ: PLTR), and (NASDAQ: TSLA) drive innovation in everything from chips to autonomous software, retail and institutional investors alike are piling into AI stocks at record levels. But with high valuations and extreme price swings, many traders are asking: Is it smart—or safe—to sell options on AI stocks?

Options selling is often viewed as a conservative strategy, but applying it to AI stocks introduces a new set of rewards and risks that demand closer examination.

The Appeal of Options Selling on AI Stocks

Selling options—particularly cash-secured puts and covered calls—can generate steady income, and AI stocks are especially attractive to options sellers for several reasons:

✅ High Premiums from Elevated Volatility

AI stocks often have high implied volatility, meaning the options command larger premiums. For example, a one-month out-of-the-money put on (NASDAQ: NVDA) can pay significantly more than a similar put on a stable blue-chip like (NYSE: JNJ).

✅ Strong Long-Term Outlook

Many investors are fundamentally bullish on AI and don’t mind getting assigned shares via puts or holding them for covered calls, making these stocks ideal for The Wheel Strategy.

✅ Frequent Trading Volume

Most AI leaders like (NASDAQ: MSFT), (NASDAQ: GOOGL), and (NASDAQ: AMD) have deep and liquid options markets, reducing slippage and improving execution quality for sellers.

Popular Options Selling Strategies for AI Stocks

1. Cash-Secured Puts

Investors sell puts at strike prices they would be happy to own the stock. With AI stocks trading at elevated levels, this strategy allows them to buy into dips and get paid for waiting.

Example: Selling a $120 put on (NASDAQ: PLTR) for $3 premium results in either:

Earning $300 in premium if the stock stays above $120
Buying 100 shares at $120 minus the premium (effective price: $117)

2. Covered Calls

Traders who already own AI stocks can write covered calls to collect premiums while potentially capping some upside.

Example: Writing a $150 call on (NASDAQ: NVDA) when it’s trading at $145 could generate $5 in premium. If shares are called away, it’s at a profit. If not, the premium adds income.

3. Credit Spreads

For investors seeking defined risk, bull put spreads or bear call spreads on volatile names like (NASDAQ: TSLA) or (NASDAQ: AMD) can limit potential losses while still generating yield.

But What About the Risks?

❗ Extreme Price Swings

AI stocks can move 10–20% on earnings, news, or macro developments. A poorly timed put or call sale could result in:

Assignment at a much higher price than current market value
Missing out on major rallies if a covered call caps gains

❗ Valuation Concerns

Many AI stocks trade at lofty price-to-earnings or price-to-sales multiples. If sentiment shifts, even strong companies may face rapid multiple contraction, hurting option sellers caught off guard.

❗ Event Risk

Earnings reports, government regulation on AI use, or executive comments (especially from figures like Elon Musk) can cause overnight price gaps that outpace options premium collected.

Ideal AI Stocks for Options Selling

Not all AI stocks are equally suited for these strategies. The best ones tend to combine liquidity, clear narratives, and moderate (but not extreme) volatility. Top candidates include:

(NASDAQ: NVDA) – Dominant chipmaker with large option premiums
(NASDAQ: PLTR) – AI-driven government contracts and a loyal retail following
(NASDAQ: MSFT) – AI integration via Azure and OpenAI, but more stable
(NASDAQ: AMD) – Strong semi story with volatility for traders
(NASDAQ: TSLA) – Volatile, news-sensitive, and speculative, but popular among options sellers

Who Should Avoid Selling Options on AI Stocks?

While the upside potential of selling options on AI names is appealing, it's not for everyone. You may want to avoid this approach if:

You don’t want to own the stock long-term (for puts)
You can’t tolerate wide swings in your portfolio
You lack capital to secure trades (especially for CSPs)
You’re chasing income without understanding the company risk profile

Risk Management Is Key

Use lower delta options (0.20–0.30) for out-of-the-money safety cushions.
Avoid earnings weeks unless you are comfortable with major moves.
Consider shorter-duration options (weekly or monthly) to avoid prolonged exposure.
Always size positions based on your risk tolerance, not just your account size.

Conclusion

Selling options on AI stocks is not only possible—it can be highly profitable. But it requires discipline, market awareness, and a clear understanding of the underlying company.

If you’re bullish on the long-term potential of AI but cautious about short-term volatility, selling cash-secured puts may be a smart way to buy into dips while collecting premium. Likewise, covered calls can monetize unrealized gains without selling your position outright.

That said, these are not set-it-and-forget-it trades. In the world of AI, where innovation moves fast and prices even faster, options selling offers opportunity—but not without risk.

Disclaimer

This article is for informational purposes only and does not constitute financial advice. Investing in options and high-volatility sectors like AI involves risk and is not suitable for all investors. Always consult a licensed financial advisor before making investment decisions.

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