Options Traders Double Down on Nvidia Recovery Amid AI Skepticism

Nvidia shares experienced a modest decline on Tuesday following reports questioning the growth trajectories of OpenAI and the broader artificial intelligence ecosystem. However, rather than signaling a trend reversal, the sell-off has triggered a surge in bullish activity among options traders who view the price drop as an entry point for a return to record highs. Recent data indicates a shift in the stock's volatility profile. Previously, Nvidia options had been trading at a lower cost than the VanEck Semiconductor ETF (SMH) due to a period of tight price consolidation. This trend reversed Tuesday as implied volatility climbed, coinciding with a heavy influx of call buyers. The scale of the bullish bias is evident in the trading volume. According to data from SpotGamma, call premiums accounted for $648 million of the $818 million in total options spending for the day, with call volume more than doubling that of puts. Traders are currently pricing in a move of over 10% by the end of next month, specifically targeting the period following the company's upcoming earnings announcement. While the overall sentiment is positive, some institutional players are employing more conservative strategies. A significant portion of the activity consists of call spreads, including a notable bet on a 200/260 spread expiring in March 2027. This specific trade suggests a long-term expectation that the stock will reach $260, representing a 21% increase from current levels.