"Precision shorting" NVIDIA, a trader made a profit of $6.5 million in one day, then suspected of locking in profits
Earlier on Tuesday, 60,000 put spread contracts with a strike price of $119/$115 were bought, with a total cost of approximately $1.23 million. In the early trading session on Wednesday, about 58,000 of the same spread contracts were traded in one go at a price of around $7.83 million. Market participants indicated that this transaction appears to be a closing position. If it was the same trader, their total profit would exceed $6.5 million
A trader who accurately shorted NVIDIA in the options market made over $6.5 million in a single day.
Earlier on Tuesday, 60,000 put spread contracts at $119/$115 were bought, with a total cost of approximately $1.23 million. This option involves buying a put option with a strike price of $119 while simultaneously selling a put option with the same expiration date and a strike price of $115.
In other words, the buyer bet that NVIDIA's stock price would fall below $119 by this Friday, while reducing costs by selling options with a lower strike price of $115. This strategy carries less risk than simply buying a $119 put option, but also limits the maximum profit potential.
For this trade to be profitable by the option's expiration this Friday, NVIDIA's stock price would need to drop nearly 6% from Tuesday's closing price. In just one day, NVIDIA, the "center of the US stock universe," achieved this, and the trade quickly paid off.
On Wednesday, the Philadelphia Semiconductor Index plummeted nearly 7%, with the ETF tracking the index experiencing its largest drop since the pandemic began. NVIDIA fell by 6.6%, ranking the worst among the "tech seven sisters" in the general decline, while ASML dropped nearly 13% and was temporarily halted. NVIDIA ultimately closed down 6.6% at around $118.
It is worth noting that on Wednesday morning, approximately 58,000 similar spread contracts were traded at once for around $7.83 million. While it cannot be confirmed if this was the same investor, market participants suggest that this trade appeared to be a closing position. Therefore, if it was the same trader, their total profit exceeded $6.5 million