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It was a tough day for Nvidia. The chip maker closing down just over 2%, but shares have soared, of course, still, this year. We're about 145%. For those who are looking for alternative ways to take advantage of the stock's run, options might be a possibility. Here for the options playbook sponsored by Tastytrade, we've got Jim Struger, Kinio capital managing partner. Um, Nvidia's trading has been interesting indeed, right? We mentioned it was down today. It was up on the week, however. Um, and it's been like this interesting trade with AI where it runs up, then people say, well, maybe it ran up too much, and then it comes down, then it runs up again. Um, so how are you thinking about it?

Well, the way we're thinking about is we have investors coming to us saying, I've got too much Nvidia. It's been a wonderful stock for a long time now, up 10 times in the last two years, as you said up 140 plus percent in the last year. What that means is investors are enormously long Nvidia relative to everything else in their portfolio. So we've had some, I think, relatively intelligent investors raise a hand and say, I love Nvidia, I want to stay long Nvidia, but there's a much bigger AI theme here to be playing, and I'd love to, I'd love to dial back my Nvidia exposure a little bit.

I just want to linger on this for a minute because sometimes we talk about like rebalancing your portfolio, right? Oh, I, you know, because stocks have gone up so much, I'm too long stocks, I'm not long enough bonds. We don't talk about it often enough with individual stocks like this. So it's so that's effectively what you have to do sometimes is rebalance.

Absolutely, especially in this unique case where you have investors who could be 50, 60, 70% long Nvidia relative to an entire portfolio, right? Great stock, probably a great future, near future certainly, until competition picks up in several years. But if you're long 50, 60, 70% Nvidia relative to the rest of your portfolio, makes an awful lot of sense to dial that back. And now people are beginning to understand that there are many other ways to participate in AI and AI infrastructure without owning just Nvidia have an exposure to GPUs.

And so what are some of those ways, Jim? Walk us through it. What are some smart strategies?

Well, uh, it's across the board in terms of where you are. We started a AI infrastructure fund earlier this year. It touches utilities, it touches, uh, energy infrastructure, it touches everything into the data centers, it touches water, it touches construction companies. So plenty of industrials are ways to play this. One company that we like a lot is called Core scientific. If you're thinking about AI infrastructure, you really want to spend some time looking at the Bitcoin miners. Because something that happened earlier this year was core scientific, symbol CORZ reached an agreement with a private company called Core weave, which is a hyperscaler. And that agreement was for core weave to come in and take what will amount to about 500 megawatts of compute power from core scientific. And what that's done is it's taken these Bitcoin miners and extracted them from being pure play Bitcoin miners. Now it's more about high-performance compute. And that's a critical element. And if you take another step back and just provide a framework around valuation, Blackstone just bought a company in Australia called Airtrunk, paid about $20 million per megawatt. So look at some of these miners. Now it's not apples to apples per se, but still from a valuation perspective, using a deal that was just done a couple weeks ago, you can overlay that on some of these miners and get a sense of the fact that their valuations are multiples away from a deal that was just done in Australia.

Okay. So how do you look at it from an options perspective then and try to take advantage of that?

Sure. So the way we're thinking about this with some of our clients is, if you're overweight Nvidia, let's start working out of that gradually, but let's exploit the fact that Nvidia implied volatility is 45, right? Compare that to Apple, Microsoft, those are about half as much, right? So we can take premium out of Nvidia via the listed options market and work out of some portion of that stock over time. So the way we framed it up here is looking at to November 1st expiration. If you're long in video, this was priced up this morning, so I know stock's a little bit lower, but you sell a 140 strike call in the size where you want to reduce your position, right? So what you're doing is you're matching the number of calls you're selling against your long stock with the amount of stock you actually want to reduce in Nvidia, right? You sell that, you pocket, it was around $2.50. That annualizes at about 20% a year. Simply annualizing it, if you make the assumption that those calls expire worthless, right? Eventually what probably happens is, uh, Nvidia moves up, you get called away in that stock. And so you're naturally reducing your position, but you're exploiting the fact that there's elevated implied volatility in Nvidia by doing that. So it's a nice use of the option market to take down your Nvidia exposure while generating income.

Right.

And then the other side of that is that core scientific.

Right.

So options play.

options play.

Exactly. So what we like in core scientific is going all the way to April next year expiration, right? Stock's about $12.50 right now. You sell a 10-7 put spread. You're selling a 10 put, you're buying a seven put, your maximum risk is those three points, and that's how you're sizing that position. You turn around, you buy a 20 strike call. Couple things here. Number one, we want this story to play out. That's why we're going all the way out to April. You also, as I mentioned, core weave is expected to make an announcement in the next week about an additional 120 megawatts of of compute power that they're going to contract with core scientific near-term catalyst. And core weave is also expected to go public next year. So core scientific could be a very nice proxy for core weave as it goes through the process of announcing it's going IPO and then leading up to that IPO, investors are going to want exposure. Core scientific, core weave, now in this lovely agreement together, core scientific should benefit from that as a proxy to core weave. Core weave got a $19 billion valuation on an $8 billion debt raise a few months ago.

I'm going to remember this when core weave is going public. We're going to have to have Jim back in.

We will.

Jim, thanks so much for being on set. Appreciate those ideas.

Thank you very much.