Nancy Pelosi is a former Speaker of the U.S. House of Representatives, the first woman to hold that position. She is in her 37th year representing California’s 11th Congressional District. Pelosi is a successful politician, wife, mother and grandmother. And some may also think she’s a smart investor, based on her public disclosures of transactions.
A close look at those revelations, however, shows that Rep. Pelosi is not making the smart investment moves. Instead, it is her husband, Paul Pelosi.
Mr. Pelosi is benefiting immensely from his investment in Nvidia (NASDAQ: NVDA)Here’s how he does it differently, and why his strategy could be smart for you too.
Paul Pelosi’s investment approach
Since the beginning of 2023, Mr. Pelosi has invested his money eight times. Two of those transactions involved limited liability companies (LLCs) that were not publicly traded. However, the other transactions involved listed companies.
Pelosi invested in it Apple And Palo Alto Networks twice per period during the period. He invested in Microsoft and Nvidia once each. There are two common denominators with these purchases. First, they were all aimed at technology leaders. Second, Pelosi didn’t buy shares of any of these stocks. Instead, he bought or exercised call options.
Call options give an investor the right (but not the obligation) to buy shares of an underlying stock at a specific price and on a specific date. Pelosi’s investment approach is to buy call options with strike prices that are deep in the money (i.e., significantly lower than the stock price at the time). He also prefers expiration dates that are far in the future.
How much did Pelosi make on 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 company’s 10-for-1 stock split on June 7, 2024.)
Nvidia’s stock has risen nearly 160% since Pelosi bought the 50 call options, and now trades at around $125. If he were to exercise those calls at the split-adjusted strike price of $12 (which reflects the company’s 10-for-1 stock split) and purchase 50,000 shares (50 options x 100 shares per option x 10 adjusted for the split), his investment would be worth about $6.25 million.
Unfortunately, we don’t know exactly how much those call options cost Pelosi. However, we do know that if he had bought Nvidia stock outright on November 22, 2023, his initial investment would have been in the neighborhood of $2.5 million. Because buying deep-in-the-money calls is cheaper than buying stock outright, Pelosi made more than $3.75 million from his Nvidia trade.
Why it’s a smart strategy
Why is this a smart strategy for Pelosi and possibly a smart one for you? It reduces the risk level of investing.
As mentioned earlier, buying deep-in-the-money call options is less expensive than buying stocks outright. This means you risk less money. These options rise at about the same rate as the underlying stocks, so you are well-positioned to benefit from stock price gains just as much as if you had bought the stocks.
You do need to keep in mind that you have to exercise the options before the expiration date, otherwise they become worthless. And you can still lose money. The call options fall in value at about the same rate as the underlying stock falls. However, because you haven’t invested as much money, the amount you can lose is less than if you had bought the stock.
Buying deep-in-the-money call options on Nvidia (or any other stock) is more complicated than simply buying the stock. Investors must first obtain approval from their brokerage firm to trade call options. But for some, the hassle may be worth it. Paul and Nancy Pelosi would almost certainly say it is.
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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 $395 Jan 2026 calls on Microsoft and short $405 Jan 2026 calls on Microsoft. The Motley Fool has a disclosure policy.
How Nancy Pelosi’s Husband Is Making Big Profits on Nvidia—And Why His Strategy Could Be Smart for You, Too was originally published by The Motley Fool
