Is It Time to Book Some Profits in NVIDIA? Here's How You Can Trade the $4 Trillion NVIDIA Stock Using Options

Nvidia (NVDA) has officially made history by becoming the first company ever to reach a $4 trillion market valuation. Just a few months ago—during what’s been dubbed the “Liberation Day” lows in April—the stock dipped sharply, nearly touching a $2 trillion market cap as its price fell to an intraday low of $86.62.

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Since that point, the stock has made a remarkable rebound, climbing nearly 70% and positioning itself as the most valuable company on the planet, ahead of tech giants Apple and Microsoft. Both of those companies, which are also part of the so-called “Magnificent Seven,” previously hit $3 trillion in market value, but Nvidia has now outpaced them.

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Interestingly, Microsoft is one of Nvidia’s most significant clients, adding another layer to this achievement. CEO Jensen Huang now holds the distinction of being the first executive to lead a company to a $4 trillion valuation. Nvidia took three decades to reach a $1 trillion market cap—and then surged to $4 trillion in just two years. That kind of growth is nearly unprecedented.

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This meteoric rise has left many investors stunned and impressed. It’s nothing short of extraordinary.

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Despite Nvidia’s continued strength and no major visible obstacles on the horizon, there’s a trading principle that’s worth remembering—one I picked up during my years in the Chicago trading pits: “Pigs get fat, hogs get slaughtered.” In other words, greed can lead to costly mistakes. While it’s tempting to continue riding the wave higher, this might be a smart time to lock in gains, especially for those who’ve been holding NVDA through this aggressive run-up.

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Personally, I was lucky enough to pick up shares of Nvidia during that April dip. Watching the stock rise over recent months has certainly made me think about selling either the stock itself or some call options. But up until now, I’ve resisted doing so.

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Now that Nvidia has hit this $4 trillion milestone, I’m taking that as a cue to adjust my position. I’m not outright selling my shares, but I am putting on a more defensive strategy—one that allows me to benefit if the stock pauses or pulls back after such a steep ascent. I’ve chosen to implement a risk reversal strategy using options, which gives me downside protection while maintaining exposure to the stock.

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It’s important to note: if you don’t own Nvidia stock already, this type of strategy might not be suitable for you—especially since selling naked calls can be very risky. In that case, you might want to consider buying call options to control your risk more effectively.

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The Trade: Risk Reversal Strategy

Here’s how I’ve structured my trade:

• Sold the NVDA $170 call option expiring August 22, 2025, for $6.80
• Bought the NVDA $150 put option with the same expiration date for $2.75

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At the time of the trade, Nvidia stock was trading around $166 per share.

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This creates a credit spread, meaning I received a net premium of $4.05 per share, or $405 for each option contract I executed. This kind of trade profits if Nvidia either stays below $170 or drops toward $150 by the expiration date. The put gives me protection if the stock experiences a correction, while the call I sold caps my upside above $170.

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What makes this setup appealing is that I’m still long Nvidia stock, so this trade helps me take some money off the table while still staying invested in the company. If Nvidia takes a breather after its massive rally, this strategy allows me to benefit from a potential pullback while locking in a credit today.

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In summary, while Nvidia has had an extraordinary run and remains a leader in AI and chip technology, now might be a wise time for long-term investors to start managing their risk. Taking profits or using options to hedge exposure—like in this risk reversal strategy—can provide a safety net without completely exiting the trade. After all, it’s better to be cautious when the crowd is euphoric, especially after a historic climb to a $4 trillion valuation.

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