Semiconductor ETF SMH Defies Selloff With Strong Bullish Signal | Smart Money Option

By Chancy

U.S. stocks came under pressure on Friday, but semiconductors bucked the broader market, with $VanEck Semiconductor ETF (SMH.US)$ up about 2% intraday to around $565. $NVIDIA (NVDA.US)$ and $Advanced Micro Devices (AMD.US)$ moved higher, while memory names including $Micron Technology (MU.US)$ and $SanDisk (SNDK.US)$ posted even stronger gains.

As the sector rallied, a large trade appeared in SMH options: 13,000 bullish risk reversals traded together, selling downside puts and buying upside calls to bet on further semiconductor gains over the next several weeks.

13,000 Risk Reversals Bet on More Upside

At around 10:31 a.m. Friday, two SMH option trades hit the tape simultaneously:

– 13,000 Oct. 16 $535 Puts were sold at about $11.53, collecting roughly $14.99 million in premium.

– 13,000 Oct. 16 $615 Calls were bought at about $9.03, costing roughly $11.74 million.

The trades had the same timestamp and size and were both flagged as Open, Cross, and Multi-Leg, suggesting they were part of the same strategy.

After using the put premium to fund the calls, the position still collected a net credit of roughly $3.25 million, or about $2.50 per share.

SMH was trading around $566.59 at the time. The $535 Put was about 5.6% below the spot price, while the $615 Call was roughly 8.5% above it. The structure is straightforward: take on downside risk below $535 in exchange for upside exposure above $615. Including the initial credit, the downside breakeven at expiration is around $532.50.

Click here to view SMH's options.

OpenAI’s New Model Adds Fuel to the AI Hardware Trade

On the fundamental side, OpenAI unveiled GPT-6 Astra on Thursday, reinforcing expectations for continued growth in AI training and inference demand. More powerful models and agent applications require greater computing capacity, supporting demand across GPUs, HBM, DRAM, custom ASICs, and networking chips.

That theme is showing up in Friday’s price action. Even as the broader market weakened, money continued flowing into AI hardware and memory stocks, with Micron, $SK hynix (SKHY.US)$ , and $SanDisk (SNDK.US)$ among the stronger performers.

SMH offers broad exposure to major semiconductor names including Nvidia, $Broadcom (AVGO.US)$ , AMD, and Micron, making it a direct way to trade strength across the AI hardware supply chain. Friday’s sector outperformance therefore lines up well with the large bullish options trade.

$615 Is the Level to Watch

The 13,000 Calls represent exposure to 1.3 million SMH shares. With the $615 strike about 8.5% above SMH’s price at the time of the trade and only around six weeks until expiration, the position carries a fairly aggressive bullish view.

The downside risk is also clear. If SMH falls below roughly $532.50 by expiration, the short puts begin generating a net loss.

Against the backdrop of Friday’s semiconductor strength, the trade sends a clear bullish signal: large money is willing to take on downside risk to finance upside calls, betting that the AI semiconductor rally has further to run. The $615 level will be the key target to watch for this risk reversal.

Bullish Risk Reversal Strategy：

Broadcom Eyes $490? Smart Money Makes a Bold Bullish Bet | Smart Money Option

SpaceX's First Lock-Up Ends: Why Is Smart Money Bullish? | Smart Money Option

Click here for more unusual options activities.

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.

602K Views