Nancy Pelosi is a former Speaker of the U.S. House of Representatives -- the first woman to serve in that position. She's in her 37th year of representing California's 11th Congressional District. Pelosi is a successful politician, a wife, mother, and grandmother. And some might think she's a savvy investor as well based on her public disclosures of trades.

However, a close examination of those disclosures reveals that Rep. Pelosi isn't making the shrewd investing moves. Instead, it's her husband, Paul Pelosi.

Mr. Pelosi is profiting big-time from his investment in Nvidia (NVDA -0.36%). Here's how he's doing things differently -- and why his strategy could be smart for you too.

Paul Pelosi's investing approach

Since early 2023, Mr. Pelosi has invested his money eight times. Two of those transactions involved limited liability companies (LLCs) that weren't traded publicly. The other trades, though, involved public 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 with these buys. First, they all focused on technology leaders. Second, Pelosi didn't buy shares of any of these stocks. Instead, he purchased 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 by a specific date. Pelosi's investing approach is to buy call options with strike prices that are deep in the money (i.e., significantly below the share price at the time). He also prefers expiration dates that are well into the future.

How much has Pelosi made on Nvidia?

On Nov. 22, 2023, Pelosi bought 50 Nvidia call options with a strike price of $120 and an expiration date of Dec. 20, 2024. At the time, Nvidia's share price hovered around $500 (note that this was before the company's 10-for-1 stock split conducted on June 7, 2024.)

Nvidia's share price has skyrocketed nearly 160% since Pelosi bought the 50 call options and is now around $125. If he exercised those calls at the split-adjusted strike price of $12 (reflecting the company's 10-for-1 stock split) and bought 50,000 shares (50 options times 100 shares per option times 10 adjusting for the split), his investment would be worth roughly $6.25 million.

Unfortunately, we don't know exactly how much those call options cost Pelosi. However, we do know that had he bought Nvidia shares directly on Nov. 22, 2023, his initial investment would have been in the ballpark of $2.5 million. Since buying deep-in-the-money calls is less expensive than buying shares directly, Pelosi has made more than $3.75 million on his Nvidia trade.

Why it's a smart strategy

Why is this a smart strategy for Pelosi and potentially a smart one for you? It lowers the risk level of investing.

As previously mentioned, buying deep-in-the-money call options is less costly than buying shares directly. As a result, you don't have to put as much money at risk. These options increase at roughly the same rate as the underlying stock, so you're well-positioned to profit as much from share price gains as if you'd bought the stock.

You do have to remember to exercise the options before the expiration date or they'll become worthless. And you can still lose money. The call options decline in value at around the same rate if the underlying stock falls. However, because you don't have as much money invested, the amount you can lose is lower than if you'd bought the stock.

Buying deep-in-the-money call options of Nvidia (or any other stock, for that matter) is more complicated than simply buying the stock. Investors must first obtain approval from their brokerage to trade call options. But for some, the trouble could be worth the effort. Paul and Nancy Pelosi would almost certainly say that it is.