Super Micro’s 28% Slump Triggers Options Hedging Amid Equity Raise: Options Chatter

$Super Micro Computer (SMCI.US)$ fell 28% Wednesday after the server maker announced a multi-billion equity raise to fund AI parts, triggering a rush of options hedging that worsened the slump.

The company announced a $7 billion offering of common stock and depositary shares to raise the funds needed to buy the components that will go into building advanced artificial intelligence servers to fulfill orders worth about $39 billion.

The offering was estimated to result in a 27% dilution for existing shareholders, a Bernstein analyst was quoted by Bloomberg as saying. That leaves existing shareholders with a smaller slice of the company.

The selling pressure was amplified by the options market. That’s where gamma comes in. Gamma measures how fast an options dealer’s hedge needs to change as a stock moves. Dealers who sold put options to investors had to sell SMCI stock as it dropped to stay neutral. Put options are contracts that give holders the right to sell the stock at a predefined strike price.

The Gamma Exposure screen shows a large “Put Wall 35,” a concentration of put contracts at the $35 strike during early trading. When SMCI slid below $35, dealers were forced to sell more shares to balance their books, and that forced selling fed the decline. It’s a feedback loop: lower price triggers dealer selling, which pushes the price lower.

The fear showed up in volatility too. Implied volatility, or IV, reflects the expectations of how much a stock might swing, priced into options. SMCI’s IV hit 91.45%, with an IV percentile of 85%, according to exchange data tracked by moomoo. That means premiums now are higher than 85% of the trading days over the past year.

The short-term fear is even starker. Options expiring June 12 showed IV above 125% across key strikes, according to the Volatility Term Structure. That shows traders are paying up for protection right now, not next quarter.

Share your thoughts on Micron in the comments section. Can the stock rebound from the slump, or is it just the beginning of a longer-term downtrend? Let your voice be heard by voting below. And if you want to read more options columns, like this one on Micron, or this one on Sandisk, 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.

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