Options Bulls Making Their Move as NVDA Breaks Records

Nvidia (NVDA) recently became the first company to achieve a $4 trillion market capitalization, driven by a strong rally that has seen heavy call options volume and credit spread activity, with calls significantly outpacing puts. While the stock's performance includes a 22% gain in 2025 and 27% year-over-year, its 14-day Relative Strength Index (RSI) is now above 75, signaling 'overbought' conditions and a potential short-term correction. This outlook contrasts with the remarkably low implied volatility priced into options, as indicated by a Schaeffer's Volatility Index (SVI) at 36%, which is in the 2nd percentile of its annual range.

Analysis

Nvidia's ascent to a historic $4 trillion market capitalization has been fueled by a significant rally, with the stock gaining 22% in 2025 and 27% year-over-year. This momentum is mirrored in the options market, which has seen exceptionally high activity, with call volume (19.58 million contracts) substantially outpacing put volume (12.02 million) over the last ten sessions, indicating strong bullish sentiment. Specific trades, such as credit spreads on the August 160 and September 130/140-strike calls, underscore sophisticated investor conviction. However, a key technical indicator, the 14-Day Relative Strength Index (RSI), has moved above 75, signaling the stock is in 'overbought' territory and may be susceptible to a short-term correction. This potential for a pullback contrasts sharply with the options market's pricing of future volatility; the stock's Schaeffer's Volatility Index (SVI) of 36% is in the 2nd percentile of its annual range, implying that traders are pricing in unusually low volatility expectations.

Key Decisions for Investors

• Given the extremely low implied volatility indicated by the SVI in its 2nd percentile, investors with a bullish outlook could consider purchasing call options or call spreads to gain long exposure at a historically inexpensive premium.
• The overbought signal from the 14-Day RSI above 75 suggests a heightened risk of a near-term price correction, making it prudent for investors with long positions to consider hedging strategies, such as buying puts, which are currently priced attractively.
• The stark divergence between the overbought technical condition and the low implied volatility presents a potential opportunity to establish long volatility positions, anticipating that the current complacency is mispricing the potential for a significant price move.