A massive trade in Nvidia just went off – here are the details

The biggest options trade on Nvidia stock Monday seems to think the controversy swirling around the chip leader and its embattled CEO is creating a buying opportunity.

In a trade about an hour after the opening bell that involved more than $100 million in options premium, someone exchanged an existing call spread for a more bullish position that captures the next five months of trading in Nvidia.

The core position was the purchase of 52,000 195-strike calls expiring Feb. 19 worth about $57 million – contracts the trader opened for a new long position while simultaneously selling the same number of 245-strike calls for the same expiry, lowering the cost of the trade by $10 million. The net position, a bullish call spread, needs Nvidia to trade above around $206 by expiry, or about 15% higher, to be profitable. If Nvidia stock reaches the short, 245-strike call, it would represent a nearly 40% rally and return the stock to its all-time high of $243, that was reached on October 6th.

The trade was likely part of a "roll" down from an existing 210/255-strike call spread worth about $42 million that was closed out, according to SpotGamma analysis.

"The person got more aggressive rolling this spread down to lower strikes to get more upside exposure by getting higher delta," SpotGamma founder Brent Kochuba said by phone. "They're trading the call spread here because the vol is expensive going into earnings. It's a significant increase in upside delta exposure."

Delta is options parlance for describing how quickly an options price will react to a change in the underlying stock price. The trader's updated position, taken at lower strikes, will make money faster if Nvidia rallies. In other words, it's a higher conviction trade that the chipmaker's stock will soon rebound.

The 195-strike calls they bought for $57 million was the single biggest options trade on the tape Monday, according to SpotGamma. Of the top 20 options trades by dollar-amount, 12 were Nvidia, the data show.

Flows around the stock generally leaned bullish by midday, with 57% of options volume tied to calls and more than $660 million of call premium likely initiated by call-buyers, SpotGamma data show. The most popular single contract by volume was the 180-strike call expiring Monday, that needs Nvidia to recover 1.2% by the bell to break even.