Nvdia Stock Tumbles After U.S. Restricts Chip Sales to China

Put activity is ramping up in response

Deputy Editor
Sep 1, 2022 at 10:53 AM
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New U.S. licensing requirements are weighing on Nvidia Corporation (NASDAQ:NVDA). The chipmaker's shares were last seen 8.1% at $138.77 after warning that it could take a potential $400 million sales hit as the U.S. imposes new restriction on advanced chip exports to China, with the former hoping to curb U.S.-made semiconductor use in China's military.

Bearish activity is ramping up after the news. Already, more than 353,000 puts have been traded, which is three times the intraday average. Meanwhile, the 230,000 calls that have crossed the tape so far account for double what's typically seen at this point. The most popular position by far is the weekly 9/2 140-strike put, followed distantly by the 135-strike put from the same series, with new positions being opened at both contracts.

This penchant for puts is nothing new. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), Nvidia stock's 10-day put/call volume ratio of 0.99 sits higher than all other readings in its annual range. This means that while calls are still outnumbering puts on an overall basis, the latter are getting picked up at a much quicker-than-usual pace

Options look like a solid route at the moment. This is per NVDA's Schaeffer's Volatility Scorecard (SVS) of 94 out of 100, which suggests the security has frequently exceeded option traders' volatility expectations during the past year.

On the charts, Nvidia stock is trading at its lowest level since May 2021. Fresh off a 16.9% drop in August, NVDA is down 53% in 2022.


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