$5.5 Trillion In Options Are Set To Expire On Triple Witching Friday: Why Nvidia Could Take Roller Coaster Ride

Nvidia Corp. NVDA shares could go on a roller-coaster ride on Friday, as trading in contracts tied to the chipmaker has surged ahead of a record-setting June "triple witching" expiration.

Investors have bought Nvidia at a feverish pace, sending open interest on Nvidia call options above that of similar contracts tied to the S&P 500 SPX and a popular ETF that tracks the large-cap index, according to SpotGamma data, MarketWatch reported.

Nvidia's 10-for-1 stock split last week — and the fact that its weighting in the $71-billion Technology Select Sector SPDR ETF XLK is expected to jump via a rebalancing Friday — have helped to supercharge interest in bullish bets on the stock.

“Nvidia has the most options expiring in the market,” Options AI co-founder C.C. Lagator said Friday morning on Benzinga’s “PreMarket Prep” show.

Also read: Friday’s Triple Witching Hour Comes Into Play: Traders Brace For Volatility As Derivatives Worth $2.7 Trillion Expire

Friday’s Triple Witching: The triple witching Friday will see some $5.5 trillion in options tied to indexes, stocks and exchange-traded funds fall off the board, according to an estimate from options platform SpotGamma.

As the contracts disappear, investors will adjust their positions, adding a burst of volume capable of swinging individual holdings, Bloomberg reported.

Goldman Sachs analyst John Marshall estimated that Friday’s options expiration “will be the largest ever” with over $5.1 trillion of notional options exposure expiring, driven by a record $870 billion notional in single stock options.

“This exceeds the notional value of options that expired in December 2023 ($4.9T), which was the prior record high,” he said in a note.

Friday’s options falloff represents a notional value that is equal to 9.3% of the Russell 3000 market capitalization, Marshall said.

“This expiration's relative size is higher than most months, only second to December 2023,” he said.

“Index options and single stock call options volumes have picked-up while single stock put options volumes declined.”

This quarter's expiration comes as implied volatility on S&P 500 options is near the lowest level since before the coronavirus pandemic, with the U.S. benchmark index riding the surge in shares of Nvidia and other artificial intelligence-linked companies.

The expiration coincides with index rebalancing, when S&P Dow Jones Indices shuffles company weightings and ETFs that track its gauges make similar adjustments.

NVDA Price Action: Nvidia shares were down 1.8% at $128.42 at the time of writing Friday, while the Technology Select Sector SPDR ETF was trading slightly higher at $229.02.

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