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Bears continued to build up positions against the semiconductor group on Friday, as a series of eyebrow-raising trades in Micron and Nvidia dominated the tape and called into question the move in chips. More than 180,000 puts traded in SMH by midday, compared to 50,000 calls, with $46 million of premium tied to puts versus $26 million in calls, according to ThinkOrSwim and SpotGamma data. By volume, 129,000 put contracts look like they were bought, according to SpotGamma. The ratio of open interest in put contracts to calls climbed to 1.95, the highest since the second week of August, Barchart data show. The same ratio for the Invesco QQQ Trust continued its recent climb as well, to 1.51. A few big single-stock trades stood out on the tape as well. In Nvidia, just after the opening bell, someone bought 100,000 180-strike puts expiring Jan. 15 for $21 million, the biggest trade in the stock's options on the day. If it is a speculative position, it needs Nvidia to fall 22% by expiry. Arguably, the most interesting trades were in Micron. While call volumes ran 40% higher than average, about $270 million in premium was tied to likely put-buying, according to SpotGamma data. The difference can in part be explained by a string of trades in deep in-the-money put contracts expiring in June 2028. The bulk of the trades – about 125 puts with strikes from 2,250 to 2,500 – were transacted closer to the ask, suggesting they were bought. By the same logic, 50 trades at the 2,050 strike were likely sold. Micron shares are trading around $1,030. Taken at face value, it would be a net $14.5 million bearish spread position with an options delta near -1, meaning the trade functions like a synthetic short position. Traders will buy deep-in-the-money puts instead of shorting a stock if the cost of borrowing the stock is too high or if they want to have a defined risk position. In purchasing options, the most you can lose is what you put in. To be sure, interpreting bid-ask spreads can get murky when analyzing far out-of-the-money trades with low open interest and volume. "Spreads have difficulty being categorized by midpoint analysis as well, because dealers are willing to take a haircut on one leg while getting a better premium with the other," said Jason DeLorenzo, owner and founder of Volland, an options market-structure analytics platform.
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