Nancy Pelosi is a former Speaker of the United States House of Representatives – the first woman to hold the position. She is in her 37th year representing California’s 11th Congressional District. Pelosi is a successful politician, wife, mother and grandmother. And some might think she’s also a savvy investor, based on her public trading disclosures.
However, a close look at this information reveals that Rep. Pelosi is not making sound investment decisions. Rather, it is her husband, Paul Pelosi.
Mr. Pelosi is profiting enormously from her investment in Nvidia (NASDAQ: NVDA)Here’s how he does things differently — and why his strategy might make sense for you, too.
Paul Pelosi’s Investment Approach
Since the start of 2023, Mr. Pelosi has invested his money eight times. Two of those transactions involved limited liability companies (SARL) which were not publicly negotiated. The other transactions, on the other hand, involved publicly traded companies.
Pelosi invested in Apple And Palo Alto Networks twice each during the period. He invested in Microsoft and Nvidia once each. There are two common denominators in these purchases. First, they all focused on technology leaders. Second, Pelosi did not purchase shares of any of these stocks. Instead, he purchased or exercised purchase options.
Call options give an investor the right (but not the obligation) to buy shares of an underlying security at a specific price on a specific date. Pelosi’s investment approach is to purchase call options with strike prices that are very low (i.e. significantly lower than the stock price at that time). He also prefers expiration dates that are well into the future.
How much did Pelosi make from Nvidia?
On November 22, 2023, Pelosi purchased 50 Nvidia call options with a strike price of $120 and an expiration date of December 20, 2024. At the time, Nvidia’s stock price was hovering around $500 (note that this was before the 10-for-1 stock split that took place on June 7, 2024.)
Nvidia’s stock price has soared nearly 160% since Pelosi bought the 50 call options and is now around $125. If he exercised those call options at the split-adjusted $12 strike price (reflecting the company’s 10-for-1 stock split) and purchased 50,000 shares (50 options multiplied by 100 shares per option multiplied by 10, taking into account the split), his investment would be worth about $6.25 million.
Unfortunately, we don’t know exactly how much these call options cost Pelosi. However, we do know that if he had purchased Nvidia stock directly on November 22, 2023, his initial investment would have been around $2.5 million. Because buying ultra-low-price call options is less expensive than buying shares directly, Pelosi made more than $3.75 million on her trade with Nvidia.
Why it’s a smart strategy
Why is this strategy wise for Pelosi and perhaps for you? It reduces the risk level of the investment.
As mentioned earlier, buying high-yield call options is less expensive than buying shares outright. Therefore, you don’t have to risk as much money. These options increase in value at about the same rate as the underlying stock, so you’re well-positioned to benefit from the stock’s price gains as much as if you had bought the stock.
You must remember to exercise the options before the expiration date, otherwise they will become worthless. And you can still lose money. The value of call options decreases at about the same rate if the underlying stock declines. However, because you haven’t invested as much money, the amount you can lose is less than you would have if you had purchased the stock.
Buying Nvidia (or any other stock) call options at very high prices is more complicated than just buying the stock. Investors must first obtain approval from their broker to trade call options. But for some, the game is worth it. Paul and Nancy Pelosi would almost certainly say that is the case.
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Keith Speights has positions in Apple and Microsoft. The Motley Fool has positions in and recommends Apple, Microsoft, Nvidia, and Palo Alto Networks. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
How Nancy Pelosi’s Husband Is Profiting Hugely From Nvidia — And Why His Strategy Might Be Smart For You, Too was originally published by The Motley Fool
