Key Notes
- The Nvidia put position shows an estimated $196 million gain on about $8 million in net premiums.
- The October 12 trade combined 180,000 long puts with 280,000 short puts.
- Selling extra lower-strike puts creates substantial risk if the stock falls far enough.
An unidentified trader’s bearish position in Nvidia (Nasdaq: NVDA) has generated an estimated $196 million gain from an initial outlay of about $8 million, according to FT Alphaville, citing calculations by Macro Risk Advisors.
The position was opened on October 12, when Nvidia traded around $226, well before Jensen Huang’s departure as chief executive. By November 12, the stock was trading near $166. The reported gain is an estimate of the trade’s profit, not a confirmed cash payout.
How the Trade Was Built
The trader used January-expiring puts, which give their holders the right to sell shares at a specified price. The position combined two legs:
- Bought 180,000 put contracts with a $150 strike price.
- Sold 280,000 put contracts with a $100 strike price.
Selling the lower-strike puts helped pay for the higher-strike contracts. Macro Risk Advisors’ Joseph Niles identified the position, whose estimated gain was roughly 24 times its initial net premium.
The Risk Behind the Payoff
The unequal contract counts matter. In a put ratio spread, selling more lower-strike puts than the trader buys at the higher strike can create substantial losses if the stock falls far enough. The initial premium is therefore not the position’s maximum possible loss.
Nor does a put need to reach its strike price to become more valuable before expiry. At around $166, Nvidia remained above both strikes, but the contracts still had time left to run. Their market value also depends on expected volatility and the probability of further price moves. A gain based on those prices can change before the position is closed.
Nvidia Heads Into Earnings With a New CEO
Nvidia named Colette Kress interim chief executive on November 12 after Huang resigned. Kress is also retaining her role as chief financial officer while the board considers internal and external candidates for a permanent successor.
The company will report earnings on November 17, giving investors their first set of quarterly results under the new leadership.
