Nvidia shares dropped 4.84 percent to $165.40 following the leadership shakeup, leading options traders to restructure their positions instead of exiting. Investors took profits on downside hedges, rolled bullish contracts further out to 2027, and committed tens of millions of dollars to January call options. Additionally, call spreads were secured to target an approximate 16 percent rise in the share price by March. Market volatility is expected to persist until next week's earnings report provides clarity on navigating the executive change.
Key points
Options traders are repositioning for a longer-term recovery by rolling bullish contracts…: Options traders are repositioning for a longer-term recovery by rolling bullish contracts into 2027 with adjusted targets.
Nvidia's 90-day implied volatility escalated to approximately 52 percent from around 33 p…: Nvidia's 90-day implied volatility escalated to approximately 52 percent from around 33 percent recorded a month ago.
Elevated market volatility is anticipated to remain until the upcoming earnings report cl…: Elevated market volatility is anticipated to remain until the upcoming earnings report clarifies the company's executive transition.
Sources checked by our analysis pipeline: 1
NEW YORK, Nov 12 : Options traders cashed in parts of their bets against Nvidia and positioned for a longer-term share price recovery on Thursday, after CEO Jensen Huang announced he was stepping down.
Huang's departure has raised uncertainty over the future direction of the AI chipmaker he built into one of the world's most valuable companies. Chief Financial Officer Colette Kress will serve as interim CEO as the company searches for a permanent successor.
The leadership turmoil sent options volatility soaring on Thursday, but options trading suggested that investors were repositioning for a recovery rather than fleeing the stock.
"Nvida's competitive advantage and customers don't disappear overnight," said Seth Hickle, chief investment officer at Mindset Wealth Management. "The market is trying to determine whether this is a temporary leadership crisis or something that fundamentally changes the AI investment thesis."
Options give holders the right, but not the obligation, to buy or sell the underlying stock at a set price before a certain date. Call options typically gain value when the stock rises, while puts gain when it falls.
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