Do you still remember the frenzy of meme stocks causing a sensation in the market? The power of American retail investors is shocking, and now it seems like they are gathering again, but this time they are targeting Nvidia Corp, the world's third-largest company by market value.
According to reports, Nvidia is becoming a casino for YOLO's trading community.
YOLO stands for "you only live once" and is an investment philosophy of the new generation of retail investors in the United States, similar to the spirit of a gambler. On some Reddit forums, retail investors use this term when making high-risk bets in the stock market, such as working together to hype up stock prices.
Take a look at Monday's options activity: Retail investors are betting that the stock price of this $2.2 trillion chip manufacturer will more than double before the weekend. As of Monday's closing of the US stock market, Nvidia rose 0.7% to $884.55. So far this year, the stock has risen by about 84%.
Specifically, between 2:00 PM and 2:30 PM Eastern Time, traders seem to have purchased over 24000 Nvidia call option contracts, which will expire on Friday at an exercise price of $1940. It is reported that they purchased in small quantities of approximately 900 contracts per transaction, indicating that they may be retail traders who paid a total of $24000.
Nvidia is no stranger to triple digit growth, benefiting from a 231% surge in artificial intelligence (AI) in 2023. But even for the hottest stocks in the market, achieving the "doubling target" in less than a week is quite difficult.
Although this transaction is insignificant compared to betting on single digit fluctuations in the stock, it does evoke memories of the meme stock frenzy of 2021. The difference this time is that Nvidia is currently one of the most valuable stocks on Earth, rather than some small companies that can rise and fall instantly, and traders can profit in any direction.
According to analysis, although Nvidia is unlikely to achieve the aforementioned increase, as long as the company rises this week, theoretically retail investors can sell these contracts for profit.
On Monday, NVIDIA founder Huang Renxun took the stage at the SAP Center in San Jose, California, USA, to deliver the GTC 2024 keynote speech "Witnessing the Moments of AI Transformation.". He announced the GB200 Grace Blackwell superchip system equipped with B200 chips, as well as Nvidia's latest developments in AI software (NIM microservices), Omverse cloud, and embodied intelligence.
Michael Beth, Director of Equities and Derivatives Trading at WallachBeth Capital LLC, said, "Nvidia has always been the favorite AI trend among investors. We also see that during this week's Nvidia AI Developer Conference, retail investors seem to be doing some interesting things."
Chris Murphy, Co Head of Equity Derivatives Strategy at Susquehanna International Group, said that this transaction may be a type of tail risk hedge. In theory, traders can hold short positions in Nvidia call options with lower strike prices and hedge against long positions in these out of price call options.
Overall, it seems that about 33000 call option contracts with similar expiration dates and exercise prices were bought on Monday. This is the third largest trading volume contract for Nvidia on that day.