Nvidia (NVDA) shares rose 5 percent today to $177, snapping a brutal 25 percent decline over the past month.
The options market is sending a critical signal: risk reversal skew—the implied volatility gap between out-of-the-money puts and calls—hit its highest level of the year. When skew spikes this sharply after a selloff, it means investors are paying an extreme premium for downside protection relative to upside calls. That's capitulation.
This pattern typically indicates a tactical floor. The demand for puts becomes so intense that pricing reaches levels where short covering and opportunistic buying become rational. Today's 5 percent bounce is consistent with that dynamic—though it may be short-lived if the underlying concerns persist.
The critical catalyst to watch: Does the skew normalize over the next few sessions? A sharp reduction in extreme fear would suggest the worst of the selling is behind NVDA. Persistent skew, by contrast, would indicate institutional investors remain unconvinced and see further downside risk. Monitor the January and February put-call ratio closely—it will tell you whether this bounce is a genuine reversal or merely a pit stop on the way lower.
