Nvidia options flows turn bullish as chip stocks sell off

Nvidia shares moved into positive territory Tuesday despite a 5% decline in chip stocks tracked by the VanEck Semiconductor ETF, according to CNBC. Options activity showed traders positioning for further gains in Nvidia even as bearish demand rose across the broader semiconductor fund.

The stock was trading just below $200, a level it has approached since late June. CNBC reported that Nvidia remained 17% below its May record and was up about 4% for the year, as investor attention shifted toward other artificial intelligence-linked suppliers, including memory makers.

The divergence was clearest in the options market. More than 1.5 million Nvidia call contracts changed hands Tuesday, compared with fewer than 690,000 puts, according to ThinkorSwim data cited by CNBC. The same data showed more than twice as many calls bought as puts bought.

Calls give buyers the right, without the obligation, to purchase a stock at a fixed price before expiration. Put options give buyers the right to sell at a fixed price. Heavy call buying can indicate demand for upside exposure, although it can also reflect hedging or other multi-leg strategies that are not visible from volume alone.

Trading in the VanEck Semiconductor ETF showed the opposite pattern. Puts outpaced calls by nearly four to one in the fund, with traders buying 33,000 puts against 7,300 calls, according to ThinkorSwim data cited by CNBC. The ETF, known by its ticker SMH, is widely used by investors seeking broad exposure to listed semiconductor companies.

The activity followed a volatile start to the week for Nvidia after SemiAnalysis reported that the company’s next-generation Kyber server rack was at least a year behind in manufacturing. Nvidia disputed that report, according to CNBC.

Options demand in Nvidia was also tilted toward calls on Monday. CNBC reported that call volume more than doubled put volume that day, while roughly two-thirds of the $600 million in Nvidia options premium was tied to calls. Almost three times as many calls were bought as puts, according to the report.

One cluster of trades appeared to involve a single buyer purchasing $3.5 million of Nvidia calls with a $200 strike price expiring at the end of July, CNBC reported. The contracts cost just under $7 each at the time of the trade, implying the shares would need to rise by about 5.5% by month-end for the position to pay off.

Short-dated contracts dominated Tuesday’s most active Nvidia options. The five most-traded contracts were all calls expiring Wednesday, according to SpotGamma data cited by CNBC. The most active was the $200 strike call, which traded nearly 170,000 times and represented about $11 million in premium.

The positioning indicates that some traders were seeking exposure to a near-term rebound in Nvidia after two firmer sessions. It also underscored a split within semiconductor trading, with Nvidia attracting upside options demand while the sector ETF drew protective or bearish put buying.

This story draws on original reporting from CNBC.