Nvidia has already conquered the U.S. stock market. Now, it’s taking over the options market as well.
Thank you for reading this post, don't forget to subscribe!Traders sunk more money into trading Nvidia options ahead of its earnings last week than the next four most-popular options plays combined, according to an analysis of Cboe Global Markets data by Nomura’s Charlie McElligott.
A chart shared by McElligott with MarketWatch on Monday showed that traders spent more than $20 billion on options premium tied to Nvidia contracts last week.
NOMURA
That dwarfed the roughly $6.2 billion traders spent buying options tied to the SPDR S&P 500 ETF Trust,
SPY
whose options are typically among the most popular trading on Cboe’s platforms.
In another unusual development, options traders spent roughly $5 billion in premium betting on Super Micro Computers Inc.
SMCI,
The small-cap company, which now enjoys the heaviest weighting in the Russell 2000
RUT
index of small-cap stocks, has seen its share price nearly triple to more than $875 since it surprised investors with stronger-than-expected revenue and earnings in a preliminary earnings report released last month. Like Nvidia, the company has become another poster child for the artificial-intelligence boom, analysts say.
See: Super Micro’s stock could hit $1,300, Wall Street’s biggest bull says
This made SMCI the third-most heavily traded options play last week, placing it ahead of Tesla Inc.
TSLA,
typically one of the most popular plays among options traders.
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 to MarketWatch 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.
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To be sure, 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.
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.
See: Nvidia is now worth more than the GDP of every country except these 11
