This article is from the 'Options Trading at the Forefront' column, which aims to stand at the forefront of investment trends, interpret the opportunities, and teach readers how to seize these opportunities using options. If you are interested, pleaseclick hereto join the learning. You will receive updates when the column is updated. We also strongly welcome any specific content suggestions!

$CoreWeave(CRWV.US)$ Since its listing this year, it has been the subject of significant attention, and recently its notable correction has sparked further discussion, a situation somewhat similar to that of Circle. Let's first take a look at its stock price performance.

PS. Regarding $Circle(CRCL.US)$ There is also another analytical article available for viewing."How to Approach Circle Options with High Attention After a Significant Correction?"View.

What a rollercoaster ride this stock price is!

At the time of its listing in March this year,$CoreWeave(CRWV.US)$ Regarded as the most attractive stock on Wall Street, the revival of the U.S. IPO market seems to hinge on its performance. However, during the initial trading period, it undoubtedly disappointed investors. The issuance price was set at $40, significantly lower than the previous offering range of $47-55, and for most of its first day of trading, it remained below the issuance price, ultimately closing at $40. This period of stagnation was primarily due to market concerns over its high debt levels and the uncertainty of the macroeconomic environment.

After about a month of lackluster performance, aided by deep collaboration with NVIDIA, substantial orders from OpenAI, a surge in demand for AI computing power, and accelerated deployment of GPU servers, the stock price of this 'scarce asset in the AI cloud computing sector' entered a skyrocketing mode, soaring from under $50 in early May to a peak of $187, more than a threefold increase!

Subsequently, the stock experienced a correction, possibly due to technical reasons or renewed market concerns about its debt, cash flow, and profitability. The divergence of opinions among investors regarding this stock was particularly pronounced around the earnings release.

The rebound prior to the earnings announcement may reflect the market's habitual optimism regarding the AI computing race, along with early optimistic bets on the company's performance. After the earnings report, not only did the market focus its microscope on its profit realization capabilities, cash flow pressures, and the drawbacks of a high capital expenditure model, but additionally, the expiration of the IPO lock-up period on August 15, which allowed 83% of Class A shares to be unlocked, triggered significant panic in the market. Following the earnings announcement, the stock price plummeted approximately 33% over two days!

One cannot help but marvel at how the market's fluctuations are vividly illustrated in this stock, with risks and opportunities intertwined. Regardless of the past, what matters more is looking forward and finding ways to leverage volatility to our advantage!

Let us now examine the upcoming risks and opportunities for this stock, as well as how to use options to mitigate risks and seize opportunities.

*The following data is as of the market close on August 19.

Is CoreWeave a crisis or an opportunity?

$CoreWeave(CRWV.US)$ This company charges for the rental of NVIDIA's top-tier GPU computing power.

The market refers to it as NVIDIA's 'favorite child' because Jensen Huang provides it with supplies, technology, and funding. He not only prioritizes chip supply to it, directs major clients (such as Microsoft and OpenAI) to it, but also allows NVIDIA engineers to reside at the CoreWeave data center to directly support some critical technologies. Moreover, as of Q2 2025, NVIDIA has a 91.36% weight in its investment portfolio in CoreWeave stocks...

CoreWeave can be considered a leader in the AI infrastructure sector, possessing 33 artificial intelligence data centers. Its technological and service advantages in training and deploying large AI models are evident. As the AI industry continues to grow rapidly and the demand for computing power remains high, this segment of the market will continue to generate profits.

Furthermore, CoreWeave recently plans to acquire the Bitcoin mining company Core Scientific. Although the current plan faces some obstacles, if the acquisition is successful, it will save significant construction costs and greatly enhance production capacity.

The performance results released last week should have been noted, characterized by strong revenue growth, indeed demonstrating high growth traits. However, losses exceeded market expectations, and profitability pressures remain, with a high debt-to-asset ratio (reaching 85.44%). Not only are there challenges with debt and profitability, but the company also anticipates capital expenditures of $20 billion to $23 billion this year, while currently facing a substantial funding gap.

Moreover, from the perspective of clients and orders, although there are significant orders from OpenAI, the dependency on major clients is very high, and the current conversion rate of backlogged orders is also quite low. If this rate cannot be improved, then a large volume of paper orders may struggle to convert into actual revenue, which could affect its financial situation and market confidence.

In simple terms, CoreWeave's current core opportunity and contradiction lie in—its facade is the AI dividend, and the biggest hope is to become the AWS of AI computing power. As long as NVIDIA's GPUs remain in short supply and customers continue to queue for computing power, then cash flow will not be a concern. However, the underlying issue is a leverage bomb, with a clearly high leverage and heavy asset model. Once GPU supplies increase or customer foundations waver, it may lead to backlash.

Next, let’s examine its valuation, technical indicators, options, and other signals.

Although the current profits are negative, the market still assigns a high valuation, with a price-to-sales ratio of 12.87 and a price-to-book ratio of 17.08, both exceeding the industry average. The core drivers remain the demand for AI computational power and the expected revenue growth (with the 2025 guidance revised upwards to $5.15 billion - $5.35 billion).

From a technical perspective, the 5-day moving average (USD 101.385) has crossed below the 30-day moving average (USD 120.637), indicating a clear short-term bearish alignment. The MACD line (-7.474) remains consistently below the signal line (-5.478), and the histogram has not shown any reversal signals, suggesting a weak short-term trend. After the stock price fell below the lower Bollinger Band, it briefly rebounded, but the Bollinger Bands are widening, indicating that short-term downside risks persist. The RSI and KDJ indicators have shown oversold signals. Overall, it is essential to monitor whether the downward trend continues.

The current implied volatility (IV) is at 82.95%, which is at a historical low (0th percentile). Historical data shows that the historical volatility (HV) reached 129.38%, indicating that option pricing may underestimate short-term volatility risks, potentially giving an advantage to buyers.

On August 19, the put/call volume ratio was 0.86 (with put volume at 176,800 contracts vs. call volume at 204,800 contracts). This ratio is below 1 but has increased compared to the previous period, indicating a stronger bullish sentiment, although concerns about the ongoing downward trend have also risen recently.

In terms of option activity, the last five days showed no significant difference between bullish and bearish sentiment, but the trading volume of puts was noticeably higher. This may stem from investors using puts for hedging protection or engaging in unilateral volatility trading during downturns.

Based on the current situation, it is necessary to observe changes in stock prices to determine the next options strategy.

If the stock price stabilizes at the support level (for instance, whether it will further test the recent low of USD 88.65, or refer to the current lower Bollinger Band at USD 86.036), an upward movement is expected. In such a case, considering low-cost bullish strategies like a Ratio Call Spread could be advantageous, betting on optimistic Q3 performance.

If the price continues to fall below the recent support level, it could accelerate the decline (with further testing potentially reaching the USD 80 range), but there will always be a bottom. At this point, some investors might choose to sell deep out-of-the-money put options, trading time for value, betting on a rebound from the bottom, and even if there is no immediate rebound, they can acquire shares at a lower price.

CoreWeave Practical Example: Ratio Call Spread

*The following content is for educational purposes only and does not constitute investment advice.

1. Premise: Believing$CoreWeave(CRWV.US)$ that it has established a firm support level and is likely to rebound from the bottom.

2. Operation: Buy 1 Call option and sell 2 Call options with a higher strike price, all having the same expiration date; the purchased Call option is aimed at profiting from the rebound, hoping to meet the exercise conditions, while the sold Call options are intended to reduce the overall bullish cost, with the expectation that they will not meet the exercise conditions.

3. How to choose the strike price and expiration date?

The expiration date depends on your estimation of when it will likely rebound, such as in one month, around the earnings announcement from NVIDIA, or over a longer period.

As for the strike price, select the strike price of the purchased Call option at a level you believe it can surpass soon (for example, $100), and choose the strike price of the sold Call options at a level you think it will not surpass before expiration (for example, $120).

4. What are the costs and benefits?

For example, consider the strategy of "buying 1 call option expiring on September 25 with a strike price of $100 + selling 2 call options expiring on September 25 with a strike price of $120."

Based on the closing price on August 19, this transaction initially requires an option premium of $184, plus a transaction fee of $5.55, totaling $189.55.

Next, we will use the mooer's option pricing calculator to estimate how the price of this position changes as the stock price varies. This refers to real-time conditions before expiration (there may be discrepancies between the estimates and actual outcomes). To see the situation at expiration, one can directly refer to the profit and loss analysis chart above.

The assumptions regarding implied volatility (IV) in the chart below lack empirical support, but they follow basic logic: when stock prices decline, the IV of call options typically decreases, and the IV of call options closer to the stock price tends to decrease more rapidly. Conversely, when stock prices rise, the IV of call options generally increases, and the IV of call options further from the stock price tends to increase more rapidly.

5. Finally, a reminder to manage risk appropriately!

Be mindful of position size; the capital allocated to this transaction should not be excessively high, ideally not exceeding 5% of the account's net assets.

Implement appropriate profit-taking and stop-loss strategies. Specific ranges for profit-taking and stop-loss can be referenced from the chart above, and should be set according to one's risk tolerance. It is particularly important to pay attention to stop-loss strategies or risk control measures when the stock price is approaching $120.

In reality, there is no single optimal strategy for options; rather, there are strategies better suited to one's investment objectives, risk tolerance, and market expectations. Under the volatility of Circle and CoreWeave, understanding how to better utilize options to turn volatility into opportunity is a skill.

Alright, that concludes today's discussion. If you have any thoughts or suggestions regarding the options strategy for Circle and CoreWeave, feel free to leave us a message!

Welcomeclick hereJoin the learning, and you will receive notifications when subsequent columns are updated. If you have specific content suggestions, we strongly welcome them! If some parts of today's content are unclear to you but you are interested in options, you canClick herefirst learn the basics.

Finally, for mooers who are interested in starting to invest in options in the current market, why not firstclick heregrab the beginner's options package worth up to HK$2,188!