As the stock price of Nvidia (NVDA.US) plummeted, traders who shorted the company in the options market seem to have made over 6.5 million dollars.
It is reported by the Wisdom Wealth app that as the stock price of Nvidia (NVDA.US) plummeted, traders who shorted the company in the options market seem to have made over 6.5 million dollars.
On Tuesday morning, 0.06 million 119/115 put options contracts were bought for a total cost of approximately 1.23 million dollars. The buyer was betting that the stock price would fall below $119 by Friday and reduced the cost by selling put options with a strike price of $115, but this also limited the potential profit from selling. For the trade to be "in the money" at expiration, the stock price needs to fall nearly 6% from Tuesday's closing price.
This transaction quickly paid off as Nvidia's stock price fell below $119 in early trading on Wednesday, down 6.5%, and other chip manufacturers followed suit. Nvidia and other tech giants have led the rise in the market this year, and Wednesday's sell-off caused the S&P 500 index to fall more than 1%, while the Nasdaq plunged more than 2%.
In early trading on Wednesday, about 0.058 million identical put option contracts were traded in a single transaction, with a transaction amount of approximately 7.83 million dollars. Although it is unclear whether this is the same investor, market participants said that this transaction seems to be a closing position. Therefore, if it is the same trader, the total profit would be over 6.5 million dollars.
On Wednesday, AI giants such as Nvidia, ASML (ASML.US), and Taiwan Semiconductor (TSM.US) all fell, with ASML's stock price falling the most by over 12%, while the stock price of chip manufacturing and design giant Taiwan Semiconductor plummeted over 7%.
The reasons for the declines in these three stocks include concerns among investors about export restrictions and broader rotations in tech stocks.
According to Bloomberg, the Biden administration is considering implementing stricter restrictions, including controlling foreign-manufactured products that use even minimal amounts of American technology. The current restrictions have already affected the ability of American companies to sell products to China. Nvidia's sales in China account for 19% of its total datacenter revenue in the 2023 fiscal year, down to 14% in the 2024 fiscal year.
It is worth noting that the stock prices of Intel (INTC.US) and GlobalFoundries (GFS.US) rose during trading. These two companies are seen as beneficiaries of the Biden administration's push to relocate chip production to the United States.