(Bloomberg) -- Turns out, Nvidia Corp.’s results might not be the cataclysmic event stock market watchers were expecting.
The tech giant’s shares fell as much as 5.3% in premarket trading on Thursday after earnings failed to live up to investors’ hopes. Yet despite its large weighting on the S&P 500 Index and Nasdaq 100 Index, the gauges edged higher. Nvidia was down 3.6% by 7:51 a.m. in New York.
One explanation is that relatively reduced activity in Nvidia derivatives recently might be leading to fewer hedging flows pulling the wider market down. While the company’s options still represent more than 20% of the overall S&P 500 single-stock options notional traded, that’s far less than the 50% or more in May and June, according to Bloomberg calculations.
Four of the five most-owned Nvidia options expiring on Friday are calls, and the only put — with a strike of $110 — accounts for only about $700 million in notional. With shares currently trading around $120, that contract isn’t in the money and could expire worthless should the stock stay above that level.
Meanwhile, the max pain level — the underlying stock price for which the most options will expire worthless — is around $120 for the Friday expiration. That price might then act as a short-term support with options holders likely seeking to prop up the stock to avoid losses.
(Updates with premarket trading in second paragraph)
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