Trading in shares of Nvidia (NVDA) is expected to be volatile today (June 21) as the chipmaker faces a “triple witching” options contract expiration.
Triple witching refers to a situation that happens at the end of a quarter when options contracts tied to an individual stock, index and exchange-traded fund (ETF) expire on the same day.
In Nvidia’s case, its stock faces a record-setting June triple witching expiration as mostly bullish call options that bet on the company’s share price rising expire and traders take profits.
Market data shows that options bets on Nvidia’s stock rising after its recent 10-for-1 stock split are near record levels, with most of those contracts expiring today.
At the same time, the popular Technology Select Sector SPDR ETF (XLK) is expected to buy roughly $10 billion U.S. worth of Nvidia shares while selling $11 billion U.S. of Apple (AAPL) stock as part of a quarterly rebalancing.
It could all add up to trading volatility for Nvidia stock.
Options traders substantially increased their bets on Nvidia’s share price rising further ahead of both the stock split and as Nvidia’s market capitalization surpassed $3 trillion U.S. and it became the world's most valuable publicly traded company.
As such, today’s quarterly options expiration is set to be the biggest ever based on the notional value of the contracts, which stand at a combined $5.5 trillion U.S., according to market data.
The options expirations come after a blistering rally that has seen Nvidia’s stock rise nearly 800% since the end of 2022 when the current bull market began.
Nvidia stock also briefly topped $140 U.S. per share, which is more than double its 200-day moving average of $69 U.S. a share, according to Dow Jones Market Data.
Nvidia’s shares have traded higher one month after rising above their 200-day moving average 62% of the time.
The stock of Nvidia has increased 204% over the last 12 months and finished trading on June 20 at $130.78 U.S. per share.
