Options traders reacted to the surprise leadership change at Nvidia by shifting positions toward a more long-dated recovery view rather than abandoning the stock outright, market data and dealer commentary show.
Chief Executive Officer Jensen Huang said he was stepping down, creating fresh uncertainty about the direction of the AI chipmaker he helped build into one of the world’s most valuable companies. Chief Financial Officer Colette Kress will serve as interim CEO while the company conducts a search for a permanent successor.
That turmoil sent short-term options volatility sharply higher on Thursday, but derivatives activity suggested many investors were repositioning to retain upside exposure over a longer horizon. "Nvida’s competitive advantage and customers don’t disappear overnight," said Seth Hickle, chief investment officer at Mindset Wealth Management. "The market is trying to determine whether this is a temporary leadership crisis or something that fundamentally changes the AI investment thesis."
Options give their holders the right, but not the obligation, to buy or sell an underlying stock at a fixed price before a specified expiry date. In general, call options gain when the underlying rises and put options gain when it falls. The pattern of trades observed on Thursday indicated investors were rolling bullish bets further into the future, lowering immediate upside targets and monetizing some downside protection rather than cutting exposure entirely.
Data from Chris Murphy, co-head of derivatives strategy at Susquehanna, highlighted several large transactions illustrating this behavior. In one complex trade, an investor sold put options and simultaneously purchased cheaper puts, collecting about $18.9 million in premium while retaining some protection against additional declines, Murphy said.
Another investor paid roughly $18.8 million for call spreads that will pay out fully if Nvidia rises by about 16% from current levels by March. Multiple other trades pushed bullish positions out by approximately three months and reset strike prices lower, effectively giving the stock more time to recover.
Investors also purchased about 50,000 January call options, with estimated spending between $45.3 million and $55 million, reflecting bets that the shares will be higher by that expiry.
Despite these bullish repositionings, Nvidia shares were last reported down 4.84% at $165.40. The stock’s 90-day implied volatility has climbed to roughly 52% from about 33% a month ago, a move Susquehanna attributed to growing uncertainty ahead of Nvidia’s earnings report next week.
Hickle said implied volatility is likely to stay elevated until the company’s earnings release and the subsequent conference call, which market participants expect could provide clarity about management’s near-term plans. "Implied (volatility) will remain high until the earnings report, and subsequently the conference call as it can shed some clarity about how Nvidia plans to move forward past this boondoggle," he said.
As traders reprice risk and time horizons in options markets, the activity highlights a split in investor views: some are taking profits on hedges and extending bullish exposure, while others remain cautious, reflected in the widened implied volatility and the stock’s near-term weakness.