Source: Wall Street News
On Friday, there was no news promotion.$NVIDIA (NVDA.US)$The stock price dived from a 5% rise to a sharp drop of 5%, and the intraday amplitude reached 10%. What happened?
One explanation is that a large number of Nvidia call options were exercised on Friday.
Some analysts pointed out that as the weekend approached, traders began to exercise Nvidia's real-value call options, which then prompted options traders to remove hedging by selling Nvidia shares, which led to Friday's sell-off.
When options market makers sell call options, they also buy Nvidia shares to hedge risks. After the call option is exercised, hedging is removed by selling shares.
As enthusiasm for artificial intelligence soars, a large number of investors are betting on Nvidia's stock price increase through the options market. According to some data, traders invested as much as $20 billion in Nvidia's options in the last week of February, far more than other companies in the “Magnificent 7.”
Over the past month, Nvidia options transactions accounted for 1/4 of the single-ticket options market.
These options include options that prevent Nvidia from falling to $350 in March, and options that will generate revenue if the stock rapidly rises to $900 or more over the next few months.
Furthermore, leveraged ETF funds that focus on tracking Nvidia shares have recently attracted a large number of investors.
According to data from LSEG Lipper, the GraniteShares 2x Long NVDA Daily ETF reached a record daily net inflow of US$197 million on Wednesday.
The GraniteShares 2x Long NVDA ETF, Direxion Daily NVDA Bull 1.5X Shares ETF, and T-Rex 2X Long Nvidia Daily Target ETF, all three leveraged ETFs that track Nvidia, set records for net monthly inflows in February.
Editor/jayden