$NVIDIA (NVDA.US)$The stock price may experience significant fluctuations on Friday, as trading volume of contracts related to this rapidly growing chip manufacturer has increased dramatically during the June record-scale triple-witching day settlement of equity index futures, equity index options, and individual stock options.

Reminder: Triple witching day is what investors commonly refer to as quadruple witching day, but since the suspension of single stock futures trading in the USA in 2020, the term quadruple witching day has been replaced with triple witching day.

SpotGamma's data shows that investors have been pouring into bullish bets related to Nvidia at an almost unprecedented pace recently, causing open interest in Nvidia calls to exceed similar contracts tracking the S&P 500 index (SPX) and a popular ETF tracking the major stock index. Brent Kochuba, founder of SpotGamma, believes this situation is "highly unusual".

According to SpotGamma's data, the options expiring this Friday will be the largest quarterly expiration in history, with a notional value of approximately $5.5 trillion. At the same time, about a third of Nvidia's open interest in calls is due to expire on Friday, the 21st. Nvidia options expire every Friday, but during the weeks when monthly options expire, trading volume and open interest are usually higher.

Nvidia conducted a 10-to-1 stock split last week and its weighting in the $71 billion Technology Select Sector SPDR ETF (XLK) is expected to significantly increase after Friday's rebalancing, which has helped spark investor interest in betting on its stock. Typically, options expiration dates coincide with higher trading volume and volatility.

Over the past year, buying Nvidia calls has become an increasingly popular trade due to Nvidia's soaring stock price. According to FactSet data, Nvidia's stock price has risen nearly 800% since the end of 2022.

Danny Kirsch, head of options at Piper Sandler, told MarketWatch, “It seems pretty easy to get people to buy Nvidia calls. It's a bit like Pavlov's dog. The more you buy, the more money you make, so why would you stop?"

Some speculate that the upward momentum of Nvidia's stock price may weaken after the options expire on Friday, as the “gamma squeeze” that drove the stock price up eases. In options trading terms, a “gamma squeeze” is when heavy call buying forces market makers to buy more underlying stocks to hedge their positions. This can trigger buying by speculators looking to profit from rising prices, which in turn generates more demand for hedging. Gamma primarily measures the change in the stock price of the underlying, and its impact on option prices and potential returns.

However, Kirsch said he wasn't sure, "It's easy for people to come to this conclusion: once option market makers have a chance to sell some of their hedged positions, the rally in Nvidia's stock price may cool. But that hasn't been the case recently."

Kochuba pointed out that there has actually only been one other recent instance of an options buying frenzy like Nvidia's. At the end of 2021, options trading tied to Tesla's (TSLA) stock reached a fever pitch, helping the electric car maker's stock price hit an all-time high in early November of that year.

Nvidia's market capitalization surpassed $3.3 trillion at Tuesday's close, making it the largest U.S. stock by market value, surpassing Microsoft Corporation (MSFT). This achievement evokes comparisons with Cisco Systems' brief stint as the largest U.S. company in terms of market capitalization during the internet bubble in March 2000.

At the close of trading on Tuesday, Nvidia's market cap exceeded $3.3 trillion, making it the largest stock in the US, surpassing Microsoft (MSFT). This achievement has drawn comparisons to Cisco's brief stint as the largest US company during the dot-com bubble peak in March 2000.

Edited by Jeffrey