MW Here's the outlook for Nvidia's stock, according to options traders

By Lawrence G. McMillan

Nvidia shareholders are complacent and the options are inexpensive - a good time to set up protective positions

Nvidia is hitting all-time highs and has become the most valued company in history - surpassing $4 trillion in market capitalization. What is the options market is saying about this?

Options put-call ratios and implied volatility are two factors that may be able to lend some guidance as to future stock price movements.

First, let's just look at the simple chart for Nvidia (NVDA).

The stock's old high at $153 (red bar) should provide support. The 40% downturn that occurred in the first four months of 2025 is history. So the chart is certainly bullish, although the steepness of the most recent part of the advance likely suggests a mild correction.

Options can offer sentiment indicators. The first such indicator is the weighted put-call ratio. The current weighted put-call-ratio chart for Nvidia is shown below. When there is heavy call buying, the ratio is low and investors are optimistic. But when there is heavy put buying, the ratio is high and investors are pessimistic. This is a contrary indicator, so when there is "too much" call buying, one would look for a place to sell some stock, but when there is "too much" put buying, just the opposite would be the case and one would be looking to buy the stock.

Currently, the ratio for NVDA is very low on its chart, indicating that there is plenty of optimism. One would expect that with the stock at all-time highs. But just because there is optimism doesn't mean that investors should starting selling the stock. Wait until the put-call ratio rolls over and begins to rise. Then consider some selling, or implement options strategies to protect the position. That was the case in June 2024 and December 2024 (marked with "S" on the chart) but is not yet the case now.

Another gauge of investor sentiment can be found in the options market in the implied volatility of the options. That is, when traders are fearful, the stock is falling, and traders pay a high price for put options, thereby sending implied volatility to high extremes. When the fear subsides, a stock normally has a lengthy rally.

Conversely, when traders are complacent and the stock is steadily moving higher for a long time, they won't pay much for puts and implied volatility is low. From that state, when implied volatility begins to rise, it can often spell trouble for the stock.

The chart above shows the situation regarding Nvidia going back two years. Implied volatility is shown on the top half of the chart, and the stock price is shown on the lower half. In the implied-volatility section, the "fear" and "complacency" areas are marked. Currently, Nvidia investors are complacent - as you would expect with the stock at all-time highs.

The "fear" and "complacency" regions on the chart are not as directly related to stock movement as the "optimism" and "pessimism" were on the weighted put-call-ratio chart. Rather, this implied-volatility chart can be a guide as to how expensive or cheap it is to buy protection for Nvidia stock.

Watch: What's next for Nvidia, AMD and Micron amid tariffs and export curbs

So right now, Nvidia options are inexpensive (that is, they have low implied volatility), making this a good time to set up protective positions. In its simplest form, that would be an out-of-the-money put purchase. More complex protection strategies such as "collars" can be appropriate as well.

With Nvidia pushing to all-time highs, the options market is telling us that "complacency" and "optimism" are setting in with shareholders. That is hardly a surprise. Those states of positive attitude can last for awhile, but when they begin to wane, it would be time to consider protective put strategies - or perhaps selling shares.

Lawrence G. McMillan is president of McMillan Analysis, a registered investment and commodity trading advisor. McMillan may hold positions in securities recommended in this report, both personally and in client accounts. He is an experienced trader and money manager, and author of "Options as a Strategic Investment." www.optionstrategist.com

(c)McMillan Analysis Corporation is registered with the SEC as an investment advisor and with the CFTC as a commodity trading advisor. The information in this newsletter has been carefully compiled from sources believed to be reliable, but accuracy and completeness are not guaranteed. The officers or directors of McMillan Analysis Corporation, or accounts managed by such persons may have positions in the securities recommended in the advisory.

More: Nvidia's stock pops as China win may pave path to $5 trillion market cap - and beyond

Also read: Enjoy the stock market's rally - but watch out for these overbought indicators

-Lawrence G. McMillan

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July 17, 2025 13:31 ET (17:31 GMT)

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