Options Alert: Are Traders Getting Wary of Nvidia?

Nvidia is limping as America worries about AI, and one big options trader may see limited potential for a bounce.

This large transaction was detected yesterday morning in the chip giant:

• 35,000 December 245 calls were bought for $5.74 against open interest of 44,738 contracts
• 35,000 December 300 calls were sold for $0.84 against open interest of 66,772 contracts
• 70,000 November 230 calls were sold for $7.13 against open interest of 32,205 contracts.
• 70,000 November 275 calls were bought for $1.04 against open interest of 10,999 contracts.

All four blocks priced at exactly the same second. Given their matching sizes and timing, it appears that an investor closed a call credit spread in the December contracts and rolled to November. They also doubled its size and lowered the strike prices.

Calls fix the level where a security can be purchased. Traders often buy them looking for upside. They can also be sold to generate premium when investors see less chance of a move higher.

The existing call credit spread closed on Monday looked for NVDA to remain under $245 through December 18.

The new position is looking for the stock to remain under $230 through November 20.

Lowering the breakeven increases their risk of losing money. Doubling the position's size could also reflect increased confidence in the neutral view. The investor collected a net premium of $25,480,000. The potential profit would erode quickly on a move above $230.

NVDA fell 3.4 percent to $210.96 yesterday and has lost 8.4 percent of its value in the last week. It tried to rally following strong results on August 26 but stalled below its earlier peak in May. The stock also ended Monday's session below its 50-day moving average for the first time in two months.

The weakness comes as rising interest rates trigger anxiety about capital spending. Monday also saw technology leaders like Dario Amodei, Sam Altman and Elon Musk warn about potential risks from AI.  

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