Nvidia, AMD Attract Millions of Dollars in Bullish Trades Despite Sell-Off: Options Chatter
$NVIDIA (NVDA.US)$ and its smaller rival $Advanced Micro Devices (AMD.US)$ attracted millions of dollars in bullish block trades in options, signaling the continued strong conviction even amid a tech sell-off.
Bulls’ confidence is being tested as the S&P North American Expanded Technology Software Index fell deeper into bear market, dragging the rest of the tech sector and sending the NDX lower.
Nvidia CEO Jensen Huang branded the software stock selloff that dragged the rest of the tech stocks lower as “the most illogical thing in the world,” according to a Bloomberg report. “There’s this notion that the tool is in decline and being replaced by AI. Would you use a screwdriver or invent a new screwdriver?” the report quoted him as saying.
The dominant player in chips that power artificial intelligence has seen increasing trading volume on call options after the stock tumbled more than 15% from its all-time high. The decline came as Wall Street debated whether the market is now in a bubble, ignoring the company’s growth of almost 63% in its fiscal third quarter, and expectations from analysts that the expansion could even accelerate further to 67% in the three months that ended in Jan. 31.
More than 1.75 million call options that give their holder the right to buy Nvidia shares at a preset strike price have changed hands with just 40 minutes left into the trading. That's higher than the 20-day average of 1.36 million contracts.
An active buyer paid a $28.29 million premium for call options that give their holder the right to buy 2.7 million Nvidia shares at $205 shares each in 133 days. That signals optimism that the stock could climb above that strike price from its current level of $175.81 by June 18.
Nvidia’s rival $Advanced Micro Devices (AMD.US)$ led the declines on the Nasdaq after the AI chipmaker forecast first quarter revenue that missed some of the analysts’ estimates, disappointing investors who were hopeful that the rally will continue, after the stock climbed more than 100% over the past year.
AMD plunged more than 16%, on course for its worst slump since 2017. Despite the decline, 54 analysts, or about 78% of those who cover the stock, continue to have a buy rating. They have kept their ratings unchanged from a day earlier before the mixed results accelerated the sell-off.
“AMD continues to benefit from AI infrastructure build-out with strong execution across its diversified portfolio, including $390M in MI308 revenue to China not previously in guidance,” CFRA analyst Angelo Zino wrote in a note to clients late yesterday, as he reiterated his “strong buy” recommendation on the stock.
The company’s improving adjusted gross margins and operating margins reflect “pricing discipline and favorable product mix shifts toward higher-value AI and server products,” he said.
An active seller collected a $5.72 million premium for writing put options that give their holder the right to sell 150,000 AMD shares at $160 each in the next 1,045 days. That's the biggest block trade involving AMD options so far.
With strike price still more than $40 below the current stock price of $202, the seller won’t lose money on that trade unless the share price falls below $121.90 because of the premium of $38.10 a share that was already collected.
That trade signals the seller’s optimism that the slump won’t last and the downturn may be over well before the contract expires in 2028.
Share your thoughts Nvidia and AMD in the comments section. Do you think the selloff that dragged the semiconductor stocks is overdone? Let your voice be heard by voting below. And if you want And if you want to read more options columns like this one on Amazon, or this one on Tesla and Google parent Alphabet, follow me here, where you can also find my column that tracks short sellers' trading volume and other interesting stories on some of the biggest stocks.
Disclaimer: Options trading entails significant risk and is not appropriate for all customers. It is important that investors read the Characteristics and Risks of Standardized Options before engaging in any options trading strategies. Opening new options positions close to or on their expiration date comes with substantial risk of losses for reasons that include potential volatility of the underlying security and limited time to expiration. Options transactions are often complex and may involve the potential of losing the entire investment in a relatively short period. Certain complex option strategies carry additional risk, including potential losses that may exceed the original investment amount. If applicable, supporting documentation for any claims will be furnished upon request.
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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.
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75985585 : NVDA earnings don’t come out till Feb. it probably will run up before earnings.
75985585 : Feb. 25
Slay2dudes : ok
72829083 : Does the large-scale bullish options trading indicate a hedge against large-scale short selling?
VSM : LAST WEEK LIVE BOARDCAST
NVDA CHIP DELEIVER on the demand
owner said back log to fill the order that reason why stock slowdown still in the Value and volume to high for owner to carry order out
hiring more employee's to deleiver the chip across the world where should be drop off the chip demand umoguss order pkg flights