NVIDIA Hits New High Amid Cautious Options Activity

NVIDIA ($NVDA.US) hit another all-time high on Monday, closing at $238.90, a 2.12% increase from the previous record set in May. This surge comes amid strong AI hardware demand, as reported by Foxconn, Nvidia's Taiwanese server partner. Foxconn's September-quarter revenue rose 47% year-over-year to NT$3.03 trillion ($95.48 billion), with management indicating continued growth in AI-related operations through Q4. Wall Street's average price target for Nvidia stands at $334.45, with the stock now pushing toward a $6 trillion market cap.

Despite the bullish price action, options activity suggests a cautious approach. Nvidia's put/call ratio climbed to 0.70 on Monday, with 4.04 million contracts traded, up from 0.43 a week earlier. This indicates traders are seeking downside protection even as the stock reaches new highs. The market-implied probability of Nvidia finishing above the ~$248 level needed for a $6 trillion market cap by October 30 expiration is roughly 30%. By December 18, this probability rises to ~39%.

For investors holding significant Nvidia positions, two options strategies are highlighted: buying puts to hedge against potential downside and selling calls to trim excess exposure. Buying puts provides direct insurance, capping downside risk while retaining upside potential. Selling calls generates premium income, allowing investors to trim their positions at favorable prices. Options implied volatility for the October $245 call sits at 28.4%, below the 30-day historical volatility of 38.5%, suggesting a relatively modest expected move despite the recent breakout.

The breakout is supported by fundamental AI demand, but the rising put/call ratio and ~30% expiry-implied odds of reaching a $6 trillion market cap by month-end indicate traders are preparing for potential turbulence. Hedging or covered-call writing allows holders to participate in further upside while defining risk.