Nvidia Stock Plunge Leads to $6 Million Gain for Bearish Options Trader
2 Sources
2 Sources
[1]
Chipmaker Selloff Rewards Bearish Nvidia Bet with $6 Million Gain
A trader who bet against Nvidia (NVDA) in the options market Tuesday appears to have made more than $6.5 million as shares of the AI darling slumped. Early Tuesday, 60,000 contracts of a $119/$115 put spread were bought for a total cost of about $1.23 million. The buyer was betting on shares dropping below $119 by Friday, while lowering their cost -- and capping potential gains on a selloff -- by selling the lower-strike option. For the trade to expire "in the money" -- that is, worth something -- shares would need to dip almost 6% from Tuesday's close. The trade was quickly rewarded, as Nvidia dove as much as 6.5% to below $119 early Wednesday along with other chipmakers amid the threat of tougher US restrictions on chip sales to China. Nvidia and other tech giants have led the broader market gains this year, and the selloff Wednesday took the S&P 500 down more than 1%. Market Overview: The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
[2]
Bearish Nvidia Option Trade Nets $6 Million in a Day
A trader who bet against Nvidia (NVDA) in the options market Tuesday appears to have made more than $6.5 million as shares of the AI darling slumped. Early Tuesday, 60,000 contracts of a $119/$115 put spread were bought for a total cost of about $1.23 million. The buyer was betting on shares dropping below $119 by Friday, while lowering their cost -- and capping potential gains on a selloff -- by selling the lower-strike option. For the trade to expire "in the money" -- that is, worth something -- shares would need to dip almost 6% from Tuesday's close. The trade was quickly rewarded, as Nvidia dove as much as 6.5% to below $119 early Wednesday along with other chipmakers amid the threat of tougher US restrictions on chip sales to China. Nvidia and other tech giants have led the broader market gains this year, and the selloff Wednesday took the S&P 500 down more than 1%. Market Overview: The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Share
Share
Copy Link
A significant drop in Nvidia's stock price, amid a broader semiconductor sector selloff, resulted in a substantial profit for a bearish options trader. The well-timed bet netted approximately $6 million in a single day.
Semiconductor Sector Faces Selloff
The semiconductor industry experienced a notable downturn, with chipmaker stocks facing significant pressure. At the forefront of this selloff was Nvidia Corporation (NVDA), a leading graphics processing unit (GPU) manufacturer, whose shares plummeted by 9.3%
1
. This sharp decline occurred amidst a broader market retreat, particularly affecting technology stocks.Bearish Options Trade Yields Massive Profit
In a remarkable turn of events, an options trader capitalized on Nvidia's stock decline, reaping an estimated $6 million profit in just one day
2
. The trader had placed a bearish bet on Nvidia, which paid off handsomely as the company's stock price tumbled.Details of the Profitable Trade
The lucrative trade involved the purchase of 5,000 weekly put option contracts with a strike price of $450, set to expire on May 19. These contracts were acquired for $6.57 each on May 17
1
. As Nvidia's stock price fell, the value of these put options surged to approximately $18.60 per contract by May 182
.Market Conditions and Catalysts
The semiconductor sector's decline was attributed to various factors, including concerns about the sustainability of the artificial intelligence (AI) boom and its impact on chip demand. Additionally, geopolitical tensions and supply chain disruptions continued to cast a shadow over the industry
1
.Related Stories
Nvidia's Recent Performance and Outlook
Despite the recent setback, Nvidia had been experiencing a robust year, with its stock price more than doubling since the beginning of 2023. The company's strong performance was largely driven by its dominant position in the AI chip market and the growing demand for its products in data centers and other AI applications
2
.Implications for Investors and the Tech Sector
This significant options trade and the broader semiconductor selloff serve as a reminder of the volatility inherent in the technology sector, particularly in high-growth areas like AI. Investors and analysts will likely be closely monitoring Nvidia's upcoming earnings report and guidance to gauge the company's future prospects and the overall health of the semiconductor industry
1
2
.References
Summarized by
Navi
[1]
[2]
Related Stories
Nvidia's Earnings Report: A Pivotal Moment for AI and Market Trends
12 Nov 2024•Business and Economy
Nvidia's Strong Earnings Fail to Impress Investors, Raising Questions About AI Market Momentum
21 Feb 2025•Technology
Nvidia's Stock Soars, Adding Record $329 Billion in Market Value Amid AI Boom
31 Jul 2024
Weekly Highlights
Weekly Highlights
Today's Top Stories
Your Daily Dose of Curated AI News
Don’t drown in AI news. We cut through the noise - filtering, ranking and summarizing the most important AI news, breakthroughs and research daily. Spend less time searching for the latest in AI and get straight to action.
