TSLA
Tesla
-- 222.150 NVDA
NVIDIA
-- 106.980 PLTR
Palantir
-- 76.380 AAPL
Apple
-- 227.480 MSTR
Strategy
-- 239.270 
Nvidia Bears Sell Millions of Call Options Amid Share Price Slump
$NVIDIA (NVDA.US)$ bears are selling millions of dollars in call options that could be profitable if the stock stays on a downward trajectory through early 2025.
On Monday, Nvidia logged its seventh decline in eight sessions, taking its losses from a record close to more than 10%. That meets the technical definition of a correction. The market leader in chips that power artificial intelligence applications (AI) extended its losses, falling another 1.6% to $129.86 at 1:34 p.m. Tuesday.
The pullback came after the stock climbed more than 200% in the 12 months through early November, when it recorded its all-time closing high. That stellar rally came ahead of the company's ninth straight quarterly earnings beat, buoyed by strong demand from hyper-scalers competing for supply of powerful AI chips.
The rally stalled amid worries over how long Nvidia can maintain its wide lead over its rival chipmakers. While its quarterly revenue growth has slowed from 265% in its January 2024 quarter to 94% in the three months ended October, that expansion is still the fastest among its peers.
By comparison, it's closest rival $Advanced Micro Devices (AMD.US)$ grew its revenue by 17.6% in the quarter ended in September. While analysts expect the growth to accelerate to 29% in the three months ending in March, that's still just less than half the pace of expansion that analysts predict for Nvidia, according to estimates compiled by Bloomberg. (To see AMD's options chain, click here.)
Even $Broadcom (AVGO.US)$, which saw a 38% jump in shares in the two sessions after reporting earnings, is expected to trail Nvidia's growth. Broadcom is only expected to post a 17% increase in revenue in its fiscal second quarter ending in April, according to Bloomberg consensus. (To see Broadcom's options chain, click here.)
Still, that hasn't stem the slide for Nvidia shares and the bears are expressing their sentiment in the options market.
At 11:34:43 a.m. in New York Tuesday, a multi-leg transaction was posted that included an active seller collecting a $39.4 million premium for writing call options that give the holders the right to buy 3.3 million Nvidia shares at $127 each by Feb. 21. That would prove profitable for the seller should Nvidia shares slide below that strike price and stay under that level until the options expire.
At that exact time, another trade was posted where the active seller collected a $14.9 million premium for call options that give the holders the right to buy the same amount of Nvidia shares by the same expiration date at $148 each. That trade would also be profitable if the share price stay below that strike price, allowing the contracts to expire worthless.
There's no shortage of Nvidia bulls either. This morning, an active seller collected a premium of $10.03 million for writing put options that give the holders the right to sell 500,000 Nvidia shares at $128 by Sept. 19, 2025. That trade would be profitable for the seller should Nvidia stay above that strike price by the time the contract expires.
That transaction, which was part of a multi-leg trade, was posted along with the purchase of put options that give the holder the right to sell 1 million Nvidia shares at $80 each in 275 days, the same expiration as the $128 puts. The active buyer paid a $3.15 million premium for that trade.
Share your thoughts on Nvidia and its rivals in the comments section. Do you expect Nvidia to sustain its lead over its rivals, both in revenue and in share price gains? Let your voice be heard by voting below.
Options trading entails significant risk and is not appropriate for all customers. It is important that investors read Characteristics and Risks of Standardized Options before engaging in any options trading strategies. Options transactions are often complex and may involve the potential of losing the entire investment in a relatively short period of time. Certain complex options strategies carry additional risk, including the potential for losses that may exceed the original investment amount. Supporting documentation for any claims, if applicable, will be furnished upon request. Moomoo does not guarantee favorable investment outcomes. The past performance of a security or financial product does not guarantee future results or returns. Customers should consider their investment objectives and risks carefully before investing in options. Because of the importance of tax considerations to all options transactions, the customer considering options should consult their tax advisor as to how taxes affect the outcome of each options strategy. All company analysis information is provided by third parties and not by Moomoo Financial Inc. Any illustrations, scenarios, or specific securities referenced herein are strictly for informational purposes and is not a recommendation. Past investment performance does not guarantee future results. Investing involves risk and the potential to lose principal. This content is also not a research report and is not intended to serve as the basis for any investment decision. The information contained in this article does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Furthermore, there is no guarantee that any statements, estimates, price targets, opinions or forecasts provided herein will prove to be correct.
Disclaimer: Community is offered by Moomoo Technologies Inc. and is for educational purposes only.
Read more
Comment
Sign in to post a comment
Luzi Ann Santos
Moomoo Senior News and Community Manager
Former editor at Bloomberg, ex-commentary editor at Lazard. Posts aren’t investment advice. Views are just mine.
7441
Followers
18
Following
19K
Visitors
Follow
72518069 : What does that mean? Does it mean they think it will keep going down or go back up? Sorry I’m new
10baggerbamm : in a nutshell what they're doing is naked shorting the stock and they're crushing it and these are all your hedge funds your institutions and what they do is they go out and they sell calls on top of it. so they're collecting the call premium and they're shorting the stock.
Luzi Ann Santos OP 72518069 : Hi there. thanks for reading this column. I'm afraid I'm not allowed to make a prediction which way a stock is going. And to be honest, even if I can do that, I don't have the power of prediction to know for sure. The first trade cited higher up in the column will be profitable if the share price keeps falling. It doesn't necessarily mean it will. That's why I'd like to hear users' thoughts on this. Not all trades turn out to be profitable, no matter how much money they pour in. We won't know if it is until the contract expires. And even then, we won't know if the seller closed out the position before it became profitable or not.
If you want to learn more about options trading, there's a Learn tab on your mobile app. It's under the Discover button you'll find at the bottom of your screen. Maybe other users here could tell you which way they think Nvidia shares are headed.
Growing With Money : let them run down the price it will only make the stock a buy in my eyes .It will return to the highs it has shown to grow to as in the past.Strong hold and buy when you feel it has bottomed out
Jing Quan8 : When selling calls, one is assigned the obligation to sell shares at the strike price not the right to buy them
10baggerbamm Jing Quan8 : you have to understand they're shorting the stock naked they're not borrowing it they're just selling it that's the first thing the second is they're selling calls so let's suppose Jensen were to come out with some revolutionary brand new chip early he's going to release Ruben early and he makes this announcement next week for example the stock will Gap up to a new year high very quickly.. so fast your head would spin all these people that are short the stock would be forced to go into the market to cover it, they're call options are naked so they would either have to buy those contracts back at a much higher price or they're going to have to buy the stock to make delivery because they sold calls naked.
so these institutions have enormous exposure in what they're doing. a lot of it is because the end of the year they know there's going to be people locking in profits which will push the stock down tax law sellers which will push the stock down so they're using the understanding that people already are going to sell the stock so why not magnify the movement by shorting the crap out of it and while we're shorting it we might as well sell the calls naked also because the value of those contracts are going to drop significantly with the price of the underlying stock collapsing.
BONEHEAD20 : NVDA shares price will increase by 20% before April 2025. as will TSM shares price
Coach Donnie : Let’s GOOO NVDA
104247826 :![[undefined]](https://static.moomoo.com/nnq/emoji/static/image/default/default-black.png?imageMogr2/thumbnail/36x36 "undefined")
Jing Quan8 10baggerbamm : You are making things way too complicated they actually are. All I talked about here was the simple call selling/buying.
View more comments...