Insights 
VT 
Nvidia’s stock price surged over 6% on Tuesday, nearing the milestone of a $5 trillion market cap, just 2% shy of $205.36 per share. Several factors are contributing to this rise, including general market momentum and new partnerships.
Nvidia announced a deal with Nokia to invest $1 billion, and its CEO plans meetings with US President Trump and officials from Hyundai and Samsung to discuss AI integration. Additional partnerships are forming, such as a 1.2 billion Euro project with Deutsche Telekom for a data centre in Germany.
Positive Market Influences
Positive earnings from companies like UnitedHealth Group, UPS, PayPal, and Celestica have further buoyed the market. Foxconn announced plans for AI and supercomputing investments in Taiwan, expected to complete by 2026.
The stock has recently surpassed previous resistance and could continue rising. The 50-day Simple Moving Average above $180 acts as a strong support level. With the Federal Reserve poised to cut interest rates, along with anticipated earnings reports from major tech companies, Nvidia’s stock is expected to continue its upward trajectory for the week.
With Nvidia knocking on the door of a $5 trillion valuation, we see implied volatility for near-term options contracts pushing past 55%. This suggests the market is pricing in a significant move, likely driven by the upcoming Fed decision and big tech earnings. Traders should be wary of paying these high premiums for simple call options right now, as a “sell the news” event could crush that volatility.
For those who believe the rally has legs toward the $216 target, a vertical call spread looks more attractive than buying calls outright. Consider buying the November $205 strike calls and selling the $215 strike calls against them to finance the trade and define the risk. This strategy profits from the expected push toward the upper trendline while mitigating the impact of a potential volatility contraction after the news settles.
Potential Market Risks
We must also consider that this $5 trillion milestone could act as major resistance, prompting profit-taking. We saw a similar setup back in the summer of 2023 when the stock pulled back over 15% after a strong run, reminding us that sharp corrections are possible. Buying puts with a strike below the key support level of $185 could offer a hedge against a market-wide disappointment from the Fed or other tech earnings.
The options market is buzzing, with over 3 million contracts changing hands yesterday and the put/call ratio sitting at a low 0.68, signaling heavy speculation on further upside. This extreme bullish sentiment, however, often precedes short-term pullbacks, especially with the Federal Reserve’s interest rate decision looming. Remember how the market initially sold off after the Fed’s first rate cut in July 2024 before rallying; a similar reaction is a distinct possibility this week.
