Options traders have turned bearish on Nvidia’s (NVDA) stock.
Traders have been selling big volumes of Nvidia “call” options in recent days even as the share price hit a new all-time high.
Market data shows that on Jan. 7, options traders sold 200,000 lots of $140 U.S. calls that expire on January 17, along with 700,000 contracts with Feb. 21 expiries that would allow investors to buy shares of the chipmaker at $159 U.S. to $165 U.S.
Call options are bets that a stock’s price will rise by a certain date.
Essentially, the options traders have been selling contracts that would allow them to buy Nvidia’s stock at higher prices than where it currently trades over the next six weeks.
This is an indication that traders now expect Nvidia’s share price to decline in coming weeks after hitting a record high of $153.13 U.S. to start the year.
The heavy selling among options traders caused Nvidia’s stock to drop 6.2% to start the trading week.
The selling came shortly after Nvidia CEO Jensen Huang spoke at the Consumer Electronics Show (CES) in Las Vegas, where he introduced new microchips for video games.
Huang also spoke about issues ranging from artificial intelligence (A.I.) to robots and self-driving cars.
Total trading in Nvidia options contracts reached 6.73 million after Huang spoke at CES, the highest volume since Nov. 21 of last year.
Data shows that options traders have been shifting their bets on Nvidia’s stock to bearish “puts,” which are wagers that a stock’s price will decline.
The stock of Nvidia has risen 164% over the last 12 months and currently trades at $140.11 U.S. per share.
