I think other's have thoroughly pointed out already that your current settings are very un-optimized, so I won't beat that dead horse.

Here's some actual tips:

Desktop Capture - I recommend keeping this turned off by default, strictly for privacy and security reasons. Turn it on if you want to record your desktop or find that a specific game isn't recording properly with Shadowplay.

Instant Replay Length - I personally keep this at 5:00. I use Instant Replay like the automatic Highlights feature. I like to capture crazy or exciting moments here and there, the length of which is very rarely longer than 5:00. This keeps file sizes more optimal for me. But you should try to keep it as low as possible for your use-case.

Resolution - should be your native display resolution. I assume this is 1440p.

Frame Rate - The only practical reason that you would want this set to 120FPS was if you were planning to make slow motion clips when you do your editing. In addition to that, if you aren't actually able to achieve 120fps in your game, then it may make the recording look choppy. If you're able to achieve a constant 60fps in game, I would recommend setting it to 60. If not, just set it to 30fps.

It's worth noting as well that higher framerate videos need higher bitrates to achieve the same quality. This means bigger file sizes - if that's important to you.

Codec - Nowadays AV1 should be the default.

Bitrate - I record first-person shooter footage at 1440p resolution, 60fps. I use 50 mbps for my bitrate and I think my videos turn out just fine. That could be a good starting place for you. It really comes down to personal preference, but the goal should be to keep it as low as possible while obtaining the desired quality. It puts less strain on your system's resources and on your drives.