Stocks Experience Volatility as Nvidia Options Expiry Looms: Market Analysis

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The stock market saw heightened volatility on Thursday as Nvidia Corporation’s performance dragged down chipmakers, coupled with the looming expiration of a substantial volume of options contracts.

Known as “triple witching,” Friday’s expiry encompasses derivatives tied to equities, index options, and futures, collectively totaling an estimated $5.5 trillion in expirations, as reported by options platform SpotGamma. This quarterly event typically prompts widespread trading activity as investors adjust their positions.

Nvidia Corporation (NVDA) saw particularly intense trading activity in bearish options ahead of the expiration. Notably, put options with strike prices at $135 and $130 saw significant volume, totaling 365,000 and 250,000 contracts respectively, according to FactSet data. The surge in put options trading caused the put-to-call ratio for Nvidia to spike to 0.70, up from 0.58 earlier in the week.

On the technical front, Nvidia shares briefly surpassed $140 on Thursday morning, exceeding double their 200-day moving average for the first time in 2024 according to Dow Jones Market Data. Historically, such milestones have occasionally preceded short-term weaknesses, though Nvidia shares have historically traded higher one month later in 62.3% of cases.

David Cox, a technical strategist at Raymond James, highlighted a bearish engulfing pattern in Nvidia’s price chart on Thursday. This pattern often signals potential downside movement following a series of smaller upward price movements.

The upcoming options expiration is expected to be the largest on record, drawing significant attention to Nvidia options as investors brace for potential market volatility.

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