To The Moon

We have seen how $NVIDIA(NVDA)$ hit record at around $184 before dropping back to stay range-bound at around $179 to $181 region, as I hold NVDA for long term, I am contemplating whether I should lock in some gains.

So in this article, I would like to share what is the rational and structured take on why it may make sense to lock in some Nvidia gains now:

1. Technical Picture

Record high → consolidation: NVDA hit new highs but has since stalled in a range. This often reflects digestion of prior gains.

Overextension signals: The stock has been trading well above longer-term moving averages (50/100/200 day). That’s a sign momentum could be stretched.

Volume tapering: Pullbacks on lighter volume and rallies without conviction often mean buyers are pausing.

2. Fundamental/Valuation Risks

Lofty multiples: Even after some earnings upgrades, NVDA trades at a premium (P/E, EV/sales) vs. history and peers. At some point, expectations run ahead of reality.

Earnings momentum priced in: Markets may have already factored in AI/data center strength and upcoming product launches. Upside surprises get harder from here.

Capex digestion phase: Major customers (cloud giants) have committed big AI capex in recent quarters. Future quarters may show moderation, impacting NVDA’s growth trajectory.

3. Macro & Market Dynamics

Interest rate headwinds: Higher-for-longer rates can compress valuation multiples, especially for growth tech.

Sector rotation: Investors have been diversifying away from mega-cap AI plays into under-owned sectors (industrial, energy, financials). This rotation could cap NVDA’s near-term upside.

Geopolitical risks: U.S.–China restrictions on advanced chips could tighten further, a risk that doesn’t go away.

4. Behavioral Considerations

Crowded trade: NVDA is now a consensus overweight in institutional and retail portfolios. When positioning gets too crowded, even good news can trigger selling.

Risk/reward asymmetry: At record highs, the incremental upside vs. potential downside widens. Locking in partial gains helps rebalance that asymmetry.

Tax efficiency / portfolio discipline: Harvesting profits into strength builds dry powder for redeployment into other opportunities.

5. Strategic Alternatives Instead of a Full Exit

Trim, don’t sell all: Take partial profits (e.g., 20–40%) while maintaining exposure if the AI cycle has further legs.

Use options: Covered calls or collars can help lock in gains while generating income.

Rotate: Reallocate some gains into lagging but fundamentally strong areas (e.g., semis outside NVDA, industrial AI beneficiaries).

Bottom line: NVDA has been the face of the AI boom, but its range-bound behavior after hitting records, stretched valuation, potential capex digestion, and crowded positioning all suggest the risk/reward is less favorable now. Locking in some gains secures profits while leaving room to participate if the rally resumes.

In the next section, we have frame Nvidia (NVDA) scenario paths over the next 6–12 months with rough probabilities and risk/reward trade-offs:

1. Bull Case (30% probability)

Narrative

• AI/data center demand exceeds expectations, hyperscaler orders stay strong.

• New Blackwell platform drives another upgrade cycle.

• Market willing to keep paying a premium multiple despite higher rates.

Price path

• Breaks above recent range resistance (~$190–195).

• Pushes toward $225–235 over 6–12 months (+25–30%).

2. Base Case (45% probability)

Narrative

• AI demand remains solid but moderates; growth is still there but not accelerating.

• Cloud capex digestion leads to “good but not blowout” earnings.

• Sector rotation + rates cap multiples; stock consolidates.

Price path

• Trading range: $160–200.

• Midpoint outcome: $185–195 (flat to +7%).

3. Bear Case (25% probability)

Narrative

• AI capex slows materially after 2023–25 surge.

• Competition from AMD/custom silicon increases.

• Export restrictions or macro shock compress multiples.

Price path

• Breaks below ~$160 support.

• Slides toward $130–140 (≈ –25–30%).

Risk/Reward Summary (from $181.85)

• Bull upside: +25–30% ($225–235)

• Base case: Flat to +7% ($185–195)

• Bear downside: –25–30% ($130–140)

This shows symmetry in the tails (similar +30% upside vs –30% downside), but with the base case suggesting only muted returns. That’s why trimming or hedging makes sense — the stock is range-bound, so the risk/reward skew is not clearly favorable right now.

So in the next section, I would be sharing how I might want to make some option trade while trimming the positions to lock in some gains.

Here are some practical option tactics which we have matched to each NVDA scenario using current price ≈ $181.85 (post-split):

Base Case (range-bound $160–200, ~45% prob.)

Goal: generate income while waiting.

Tactic: Covered Calls

• Sell $200 calls expiring in 30–60 days.

• Brings in premium (~2–3% of stock value annualized per month).

• If NVDA drifts sideways, you pocket income.

• If NVDA rallies above $200, shares get called away at an attractive exit price.

Alternative: Diagonal Call Spread (buy longer-dated ITM call, sell shorter-dated OTM calls repeatedly) to synthetically run a lower-cost covered call.

Bull Case (breakout to $225–235, ~30% prob.)

Goal: participate in upside with leverage but cap risk.

Tactic: Bull Call Spread

• Buy $190 call / Sell $220 call expiring 2–4 months out.

• Costs a fraction of stock price (~$6–7 debit depending on IV).

• Max gain ≈ $23 (spread width – premium), ~3x payoff if NVDA rallies.

• Defined risk, capital-efficient.

Alternative: Cash-Secured Puts

• Sell $160 puts.

• If NVDA stays strong, you collect premium.

• If stock dips, you buy NVDA at an effective discount.

Bear Case (breakdown to $130–140, ~25% prob.)

Goal: hedge downside exposure.

Tactic: Protective Puts

• Buy $160 puts 2–3 months out.

• Acts as insurance if NVDA breaks range.

• Cost ~2–4% of stock price, which caps downside.

Alternative: Collar (low-cost hedge)

• Buy $160 puts + Sell $200 calls.

• Put protects downside, call sale offsets cost.

• Creates an effective floor (~$160) and cap (~$200).

• Good if you’re content to lock gains in a range.

Blended Tactical Positioning

Trim some shares to de-risk (lock in gains).

On remaining:

• Sell covered calls ($200) to monetize base case.

• Buy a small bull call spread ($190/$220) to participate in breakout.

• Collar core holdings ($160–200) if you want a “sleep-at-night” hedge.

This combo gives us income if range-bound, leveraged upside if bull, and protection if bear — a balanced overlay to the scenario probabilities.

Nvidia (NVDA) Historical vs Implied Volatility

As of late September 2025, NVDA's implied volatility is around 33.7% to 34.5%, while its historical volatility is significantly higher, with the 20-day historical volatility at about 34.9% and the 252-day historical volatility at approximately 45.5%. This means the options market is currently predicting future volatility will be lower than the recent realized volatility, as current implied volatility is below both the 20-day and the much longer-term 252-day historical volatility. 

Summary

Nvidia's stock, a leader in the AI and semiconductor rally, recently hit a record high but has since dropped back and become range-bound, currently trading between approximately $$$165 and $$$185 (as of late September 2025). This consolidation phase follows a strong uptrend and is attributed partly to geopolitical headwinds, such as US-China chip export restrictions, and investor concern over the company's significant investments in partners like OpenAI. Despite these concerns, analysts generally maintain a bullish long-term outlook due to Nvidia's dominant position and strong fundamentals in the burgeoning AI market.

Analysis on Locking in Gains

The fact that Nvidia's stock is near the upper boundary of its trading range presents a potential opportunity for investors to lock in gains on a portion of their holdings, particularly for those who bought at lower prices. This strategy is based on the idea of taking profits when the stock nears a known resistance level, especially when the price action is stalling.

• Risk Management: Locking in gains reduces your exposure to a potential pullback if the stock fails to break out and instead falls toward the lower end of its range ($165 support).

• Reallocation: It allows you to free up capital that can be used to buy back shares at a lower price (if a correction occurs) or to invest in other opportunities.

A range-bound stock with high implied volatility (IV) can be well-suited for certain options strategies that aim to profit from the price remaining within a defined range or from the decay of option premium (time decay, or theta).

Appreciate if you could share your thoughts in the comment section whether you think it might be a good idea to trim NVDA position to lock in gains, while play option to take advantage of any bullish scenario?

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire @MillionaireTiger appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.