Nvidia’s wild price swings have a strong hold on all markets, and “crazy” trading options in the chipmaker can be the culprit. The tech giant’s 8% rally on Wednesday helped lift the entire S&P 500, which had earlier fallen on a mixed inflation report. Nvidia rallied nearly 2% on Friday. While some believe Wednesday’s advance was driven by CEO Jensen Huang’s bullish comments about artificial intelligence, others think the move was mostly triggered by a burst of short-term options trading activity at Nvidia. “I don’t think yesterday’s +8% ripper in the stock was fundamentally driven,” Wells Fargo’s trading desk said in a note to clients Thursday. The desk shows some of Nvidia’s call options that expire on Friday, and are the most active contracts on Wednesday. A call option gives you the right to buy the underlying security at a specified price at a specified time. Investors generally profit when the underlying security rises in price. “It is INSANE to me that the SEC has allowed the gamification of the stock market to this degree without any sort of thought about how the gamma swings will ripple through the cash market as a result of the weekly (and soon to be 0DTE) single stock option, and the impact that will have in the market,” wrote a Wells Fargo trader, referring to the US Securities and Exchange Commission and zero days for options to expire. NVDA YTD mountain Nvidia Nvidia, which topped $3 trillion in market value earlier in 2024, is now the third largest stock in the S&P 500 after Apple and Microsoft. The chipmaker, as well as the AI story it represents, has dominated investor sentiment all year and moved other semiconductor stocks, the technology sector and the broader market. The average one-day percentage move over the past 50 days is 3.6%, which means that on any given day, the market cap changed by more than $100 billion, according to data from the Oppenheimer trading desk. “The swings up and down in the market cap this year are like nothing we’ve ever seen,” Oppenheimer said in a note.
Trading in Nvidia options can drive the entire stock market
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