(Bloomberg) — Nvidia Corp., the world’s third-largest company by market value, is turning into a casino for YOLO traders.
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Just look at options activity Monday, when traders are betting that shares of the $2.2 trillion chipmaker will more than double their price from $885 — by the weekend. Nvidia is no stranger to triple-digit gains after soaring 231% in 2023 on optimism about its semiconductors used in artificial intelligence technology. But achieving this in less than a week would be entirely achievable, even for the market’s hottest stocks.
Between 2:00 p.m. and 2:30 p.m., traders appear to have purchased over 24,000 Nvidia call contracts that expire on Friday with a strike price of $1,940. They bought it in small lots of around 900 contracts, which could be indicative of retail traders, and paid a total of $24,000.
While the trade pales in comparison to betting on single-digit stock movements, it’s reminiscent of the meme stock mania of 2021. The difference this time around is that Nvidia is one of the most valuable stocks on the planet, not a small business that can go up and down in an instant, with traders capturing profits in either direction.
While there is virtually no chance of Nvidia closing anywhere near the level of these options, traders could in theory sell the contracts for a profit if Nvidia rallied at an annual AI conference which opened in San Jose, California on Monday afternoon. Nvidia CEO Jensen Huang delivered the keynote as he introduced new chips aimed at expanding his company’s dominance in artificial intelligence, a position that has already made it the third most valuable company in the world. world.
“Nvidia is one of the favorite investors to follow the AI trend,” said Michael Beth, director of equity and derivatives trading at WallachBeth Capital LLC. “We’re now also seeing what appears to be retail making some interesting games while the Nividia AI developer conference is happening this week.”
Chris Murphy, co-head of equity derivatives strategy at Susquehanna International Group, said the deal could be a type of tail-risk hedge. In theory, traders could short Nvidia calls with lower strike prices and offset them with a long position in these other out-of-the-money calls.
Nvidia closed up 0.7% on Monday after rising 5.2% earlier in the day. The stock has gained 79% in 2024.
In total, some 33,000 call contracts with this strike and expiration appear to have been purchased on Monday. It was the third most traded contract on Nvidia that day.
–With help from Matt Turner.
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