Traders Place Big Bets on Nvidia Options
Nvidia's dominance in the U.S. stock market is now extending to the options market as well. According to an analysis of Cboe Global Markets data by Nomura’s Charlie McElligott, traders poured more money into trading Nvidia options ahead of its recent earnings report than the next four most popular options plays combined.
Record-Breaking Numbers
A chart revealed by McElligott displayed that traders invested over $20 billion in options premium linked to Nvidia contracts last week. This staggering figure far surpassed the approximately $6.2 billion spent on SPDR S&P 500 ETF Trust (SPY) options, which are traditionally among the top choices for trading on Cboe’s platforms.
Unusual Trends
In a surprising turn of events, options traders also placed approximately $5 billion in premium on bets for Super Micro Computers Inc. (SMCI). This small-cap company, now holding the heaviest weighting in the Russell 2000 RUT index of small-cap stocks, has experienced a significant surge in its share price, reaching over $875 after impressing investors with better-than-expected revenue and earnings in a preliminary report last month. Like Nvidia, Super Micro Computers Inc. has emerged as a key player in the artificial-intelligence wave, industry analysts suggest.
Market Impact
The remarkable activity surrounding Super Micro Computers Inc. positioned it as the third-most heavily traded options play last week, surpassing the likes of Tesla Inc. (TSLA), a usual favorite among options traders.
Nvidia Overtakes Tesla as Most Popular Single-Stock Option
Trading Volume Metrics
According to at least one metric, Nvidia reliably surpassed Tesla as the most popular single-stock option back in early January when trading volume is measured on a nominal basis. Nvidia’s five-day average nominal trading volume topped $116 billion as of Feb. 15, according to data provided by Asym 500’s Rocky Fishman. By comparison, the five-day average of nominal value of Tesla options changing hands was just $42.6 billion.
Stock Performance
Nominal volumes in the options market are heavily influenced by the price of the underlying shares. Nvidia’s NVDA shares have risen nearly 60% since the start of the year to $790.92 a share at Monday’s close, making it the top-performing stock in the S&P 500 SPX. By comparison, Tesla TSLA shares have fallen by 20% to $199.40.
Market Activity
Options traders piled into Nvidia calls last week, causing an unusual development in options markets, according to Steve Sosnick, chief market strategist at Interactive Brokers. Demand for options typically will be driven by bearish puts, which offer protection against a selloff. But in the case of Nvidia, it was heavier for bullish calls, a symptom of traders’ “fear of missing out” on further gains in the stock, according to Sosnick.
Traders last week were pricing in a move of nearly 11% following Nvidia’s earnings report. Nvidia shares ultimately rose 16% on Thursday after the company beat top-line expectations by almost $2 billion for the most recent quarter when it reported earnings after the bell on Wednesday.
This caused the company to add more than $200 billion to its market capitalization in a single day, the biggest such gain for a U.S. company in history.
Comparison
Nvidia is now worth more than the GDP of every country except these 11.
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