On Monday, NVIDIA Corporation (NASDAQ:NVDA) shares experienced a notable decline of 4.2%, which was accompanied by a significant volume of call options being sold. Susquehanna International derivative strategists Christopher Jacobson observed the closing sales of approximately 300,000 NVDA calls with strike prices ranging from $140 to $190, which were initially bought on October 10. The sell-off in these options contributed to the stock's underperformance and also played a role in keeping implied volatility levels steady, despite the price drop.
The sale of these call options appeared to be a strategic move by the investors to exit their positions, which had been flagged by Susquehanna as a large wave of upside call buying the day after the initial purchase. The unwinding of these positions likely added pressure to NVIDIA's stock price, causing it to close down significantly. This move also influenced the 90-Day implied volatility, which remained virtually unchanged at around 47% by the end of the trading session.
Susquehanna had previously recommended purchasing options to capitalize on the intra-quarter volatility of NVIDIA, particularly after the company's post-earnings volatility decline observed last week. The firm's strategists had suggested focusing on options expiring in December, January, and February to avoid the higher volatility premiums expected ahead of NVIDIA's next earnings report, anticipated in late February.
Following the recent trading activity and the resulting impact on NVIDIA's stock and implied volatility, Susquehanna reiterated its advice. The firm maintains its stance on the potential benefits of owning near-term volatility in light of the suppressed volatility levels and the recent downward movement in NVIDIA's stock price.
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