On Friday, traders showed a strong bearish sentiment towards the semiconductor sector, particularly through significant put options trades in Micron and Nvidia. Data from ThinkOrSwim and SpotGamma revealed that over 180,000 puts were traded in the semiconductor ETF SMH, compared to only 50,000 calls, with a premium of $46 million for puts versus $26 million for calls.
The put-to-call open interest ratio reached 1.95, the highest since mid-August, suggesting a growing pessimism among investors. Notably, a large trade in Nvidia involved the purchase of 100,000 puts with a strike price of 180, costing $21 million, which would require Nvidia's stock to drop 22% by January 15 to be profitable.
In Micron, while call volumes were 40% higher than average, approximately $270 million in premium was linked to put buying, including deep in-the-money puts expiring in June 2028. This indicates a bearish outlook, as traders may prefer buying puts to shorting the stock directly due to high borrowing costs.
Jason DeLorenzo, an options market expert, noted the complexities in interpreting these trades, particularly with low open interest and volume affecting bid-ask spreads. Overall, this trading activity signals a cautious sentiment towards the semiconductor industry, which could impact stock prices and investor confidence moving forward