Nvidia's Stock May Pose A Systemic Risk To The Market

seekingalpha10-28

Nvidia's stock has significantly impacted the Bloomberg 500, a proxy for the S&P 500 contributing 25% of gains this year and 75% since October 7, despite declining trading volume.Nvidia's volatility ...

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OngJH
·10-28
Then whats your problem, create more problem?
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}\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nNvidia's Stock May Pose A Systemic Risk To The Market\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-10-28 11:55 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4729922-nvidia-stock-may-pose-systemic-risk-to-market><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Nvidia's stock has significantly impacted the Bloomberg 500, a proxy for the S&P 500 contributing 25% of gains this year and 75% since October 7, despite declining trading volume.Nvidia's volatility ...</p>\n\n<a href=\"https://seekingalpha.com/article/4729922-nvidia-stock-may-pose-systemic-risk-to-market\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"NVDA","symbol_name":"英伟达","start_time":0,"source_url":"https://seekingalpha.com/article/4729922-nvidia-stock-may-pose-systemic-risk-to-market","article_id":"2478154039","we_media_id":null,"thumbnails":[],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2478154039","pubTimestamp":1730087716,"columns":[],"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Nvidia's stock has significantly impacted the Bloomberg 500, a proxy for the S&P 500 contributing 25% of gains this year and 75% since October 7, despite declining trading volume.Nvidia's volatility a","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"NVDA":"英伟达"},"translate_title":"英伟达股票可能对市场构成系统性风险","themeId":"","isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"NVDA":0.9},"content_text":"Nvidia's stock has significantly impacted the Bloomberg 500, a proxy for the S&P 500 contributing 25% of gains this year and 75% since October 7, despite declining trading volume.Nvidia's volatility and beta have surged, making it more sensitive to market changes and increasing its influence due to its larger market cap.The options market, particularly weekly call options, appears to be driving Nvidia's stock price, raising concerns about systemic market risks.A shift in Nvidia's fortunes could affect the entire market, especially indexes heavily exposed to Nvidia, highlighting potential vulnerabilities.Nvidia's (NVDA) stock may pose a systemic risk to the broader stock market.This year alone, Nvidia accounts for 25% of the gains in the Bloomberg 500, a tracking proxy for the S&P 500, and 75% of gains since October 7. The more recent gains come when the stock's actual trading volume declines while options trading volume surges.Nvidia's outsized impact on the market is undeniable. The stock nearly tripled this year alone and contributed almost 93 points of the 372 points to the Bloomberg 500 index.Compared to Apple (AAPL), the second most significant contributor, having added just 25 points to the index, or just 6.5%. Said another way, if Nvidia gains were not made, the Bloomberg 500 would have gained only 279 points on the year, or 16.2%, instead of the current gains of 21.6%.Rising Beta and VolatilityVolatility in Nvidia stock compared to that of the S&P 500 has increased dramatically, surging to 2.4. This outpaces other MAG7 stocks like Tesla (TSLA) (2.0) and Meta (META) (1.7), underscoring its increased market sensitivity.To be fair, Nvidia has always had a higher beta than the other names, but it wasn't always a company with among the largest market caps, either. In fact, at just the start of the year, Nvidia's market cap was $1.2 trillion, versus nearly $3.5 trillion today. Given that the S&P 500 is a market cap weight index, its impacts on the overall market are much greater today than they have been in the past.Declining Stock Volume, Surging OptionsPerhaps more interesting is that stock volume has steadily declined over the past several weeks. The 20-day average volume levels fell from around 386 million on July 1 to just 253 million currently, which seems like a significant decline in overall average trading volume.More interestingly, despite the decline in overall trading volumes, options trading volume has remained fairly consistent. The daily options volume is mostly call volume, which has steadily traded around 3 million call contracts per day versus about 1.6 million put contracts per day. The put-to-call ratio has easily favored the calls since the beginning of July.The troubling part is that the majority of the options volume occurs on a daily basis in the weekly options for Nvidia. The most heavily traded call options, specifically those with the shortest number of days until expiration, are the most heavily traded. The patterns in the call volume appear to align with the stock price.For example, the weekly options expiring on October 11 saw the stock trading in a range of roughly $125 to $136. The shares started the week around $125 and steadily climbed throughout the week until reaching $135 by Thursday afternoon and stalling out.That week shows how the Nvidia puts and call options for expiration on October 11 saw their heaviest trading volumes migrate throughout the week to the highest strike prices that corresponded with the stock price moving higher.The week of October 18's expiration saw the shares traded as low as approximately $129 to $138. But this week, the shares jumped by nearly 3.5% to start the trading week, only to fall by as much as 7% mid-week and recover all those losses by the end of the week.Again, we see how the option volumes correspond to the stock's price action. More interestingly, on October 15, the call volume subsided below $130 as the put volume rose. The call volume recovered on Wednesday, and by Thursday and Friday, the call volume was the heaviest at the $140 and $139 strike prices.This past week which was for expiration on October 25, the stock price traded in a range of approximately $137 to $144, with shares rising on Monday and Tuesday, falling on Wednesday and Thursday, and rising again on Friday.Again, the options volume tracks stock movement. Puts got more active on Wednesday when the stock price was falling, with the heavier volumes shifting higher throughout the week back to the calls.The thing is that the weekly call volumes in Nvidia account for a vast majority of the total daily options volume trading. On October 17, about 3.1 million total call contracts were traded. The most active weekly call options on that day were the October 18 $140 calls with a volume of 481,000 contracts, while the $139 calls traded about 221,000 contracts, and the $138 and $141 strikes traded around 150,000 contracts each. That means that out of 3.1 million call contracts traded, 1.0 million of them traded in a range of $3 strike price for the weekly expiration. More importantly, total weekly contracts on that day-traded between $120 and $148 equalled more than 1.6 million contracts.On October 14, it wasn't much different even though the call volume was just 2.2 million. That day, 1.0 million contracts traded for the weekly options, and the $140 calls traded nearly 333,000 contracts. This pattern continues through the three-week period, with the weekly options accounting for the vast majority of the overall call volume for the stock, while the most active contract in the calls options migrating with the strike price.Perhaps more interesting is that this occurred during a time when the stock price rose by more than 13% and its 20-day average volume fell from 291 million shares per day to 253 million shares per day, with a clear trend lower.Systemic Market RisksIt may not seem like a big deal on the surface, but from 10/7 until 10/26, the Bloomberg 500 has gained 1.08%, and Nvidia has accounted for 75% of those gains, accounting for 16.7 of the 22.3 points. Without Nvidia, the index would be flat.The problem, of course, is whether or not the options market is the driving force behind Nvidia stock. If that has become the case, and Nvidia stock is the driving force behind a large portion of the gains in the stock market, then really, the options trading activity in Nvidia has become the driving force of the stock market, or at least the market indexes that are determined by Nvidia's changes in market cap.The takeaway is that the stock market may not be what it seems, and a change in Nvidia's fortune may change the entire market's fortune. Indexes with heavy exposure to Nvidia are at the most significant risk.","kind":"highlight","is_publish_news":true,"is_publish_highlight":true,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"-1","news_tag":"analysis","news_rank":0,"symbols":[],"gpt_button":0},"commentList":[{"id":364874473902272,"gmtCreate":1730090922973,"gmtModify":1730090926762,"author":{"id":"4164272763224692","authorId":"4164272763224692","name":"OngJH","avatar":"https://community-static.tradeup.com/news/default-avatar.jpg","vip":1,"crmLevel":2,"crmLevelSwitch":0,"idStr":"4164272763224692","authorIdStr":"4164272763224692"},"htmlText":"Then whats your problem, create more problem?","listText":"Then whats your problem, create more problem?","text":"Then whats your problem, create more problem?","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/364874473902272","repostId":2478154039,"repostType":2,"repost":{"id":"2478154039","kind":"highlight","pubTimestamp":1730087716,"share":"https://ttm.financial/m/news/2478154039?lang=&edition=fundamental","pubTime":"2024-10-28 11:55","market":"hk","language":"en","title":"Nvidia's Stock May Pose A Systemic Risk To The Market","url":"https://stock-news.laohu8.com/highlight/detail?id=2478154039","media":"seekingalpha","summary":"Nvidia's stock has significantly impacted the Bloomberg 500, a proxy for the S&P 500 contributing 25% of gains this year and 75% since October 7, despite declining trading volume.Nvidia's volatility a","content":"<html><head></head><body><ul><li><p>Nvidia&#39;s stock has significantly impacted the Bloomberg 500, a proxy for the S&amp;P 500 contributing 25% of gains this year and 75% since October 7, despite declining trading volume.</p></li><li><p>Nvidia&#39;s volatility and beta have surged, making it more sensitive to market changes and increasing its influence due to its larger market cap.</p></li><li><p>The options market, particularly weekly call options, appears to be driving Nvidia&#39;s stock price, raising concerns about systemic market risks.</p></li><li><p>A shift in Nvidia&#39;s fortunes could affect the entire market, especially indexes heavily exposed to Nvidia, highlighting potential vulnerabilities.</p></li></ul><p></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/bc321a9f2117cfb23759d73e99fc938f\" data-align=\"center\" tg-width=\"750\" tg-height=\"563\"/><span></span></p><p></p><p>Nvidia&#39;s (NVDA) stock may pose a systemic risk to the broader stock market.</p><p>This year alone, Nvidia accounts for 25% of the gains in the Bloomberg 500, a tracking proxy for the S&amp;P 500, and 75% of gains since October 7. The more recent gains come when the stock&#39;s actual trading volume declines while options trading volume surges.</p><p>Nvidia&#39;s outsized impact on the market is undeniable. The stock nearly tripled this year alone and contributed almost 93 points of the 372 points to the Bloomberg 500 index.</p><p>Compared to Apple (AAPL), the second most significant contributor, having added just 25 points to the index, or just 6.5%. Said another way, if Nvidia gains were not made, the Bloomberg 500 would have gained only 279 points on the year, or 16.2%, instead of the current gains of 21.6%.</p><p></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/e55c66cf9e8acd33cef20ed4ad7c9d87\" data-align=\"center\" tg-width=\"640\" tg-height=\"147\"/><span></span></p><p></p><h2>Rising Beta and Volatility</h2><p>Volatility in Nvidia stock compared to that of the S&amp;P 500 has increased dramatically, surging to 2.4. This outpaces other MAG7 stocks like Tesla (TSLA) (2.0) and Meta (META) (1.7), underscoring its increased market sensitivity.</p><p></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/8bb2516a0cbe93b671763e714dbb5b3f\" data-align=\"center\" tg-width=\"640\" tg-height=\"318\"/><span></span></p><p>To be fair, Nvidia has always had a higher beta than the other names, but it wasn&#39;t always a company with among the largest market caps, either. In fact, at just the start of the year, Nvidia&#39;s market cap was $1.2 trillion, versus nearly $3.5 trillion today. Given that the S&amp;P 500 is a market cap weight index, its impacts on the overall market are much greater today than they have been in the past.</p><p></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/302a330c4f73285423b5501d506b082e\" data-align=\"center\" tg-width=\"640\" tg-height=\"318\"/><span></span></p><p></p><h2>Declining Stock Volume, Surging Options</h2><p>Perhaps more interesting is that stock volume has steadily declined over the past several weeks. The 20-day average volume levels fell from around 386 million on July 1 to just 253 million currently, which seems like a significant decline in overall average trading volume.</p><p></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/5cd7a96de9fa15db93aa44e54d186cd8\" data-align=\"center\" tg-width=\"640\" tg-height=\"340\"/><span></span></p><p></p><p>More interestingly, despite the decline in overall trading volumes, options trading volume has remained fairly consistent. The daily options volume is mostly call volume, which has steadily traded around 3 million call contracts per day versus about 1.6 million put contracts per day. The put-to-call ratio has easily favored the calls since the beginning of July.</p><p></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/83398330a71d7e0697e7c3bc9ff52885\" data-align=\"center\" tg-width=\"640\" tg-height=\"315\"/><span></span></p><p></p><p>The troubling part is that the majority of the options volume occurs on a daily basis in the weekly options for Nvidia. The most heavily traded call options, specifically those with the shortest number of days until expiration, are the most heavily traded. The patterns in the call volume appear to align with the stock price.</p><p>For example, the weekly options expiring on October 11 saw the stock trading in a range of roughly $125 to $136. The shares started the week around $125 and steadily climbed throughout the week until reaching $135 by Thursday afternoon and stalling out.</p><p></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/720dac79b4efb218623dd91227e4da00\" data-align=\"center\" tg-width=\"640\" tg-height=\"340\"/><span></span></p><p></p><p>That week shows how the Nvidia puts and call options for expiration on October 11 saw their heaviest trading volumes migrate throughout the week to the highest strike prices that corresponded with the stock price moving higher.</p><p></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/149efba5bf506e528c3aac3f776ea8be\" data-align=\"center\" tg-width=\"640\" tg-height=\"478\"/><span></span></p><p></p><p>The week of October 18&#39;s expiration saw the shares traded as low as approximately $129 to $138. But this week, the shares jumped by nearly 3.5% to start the trading week, only to fall by as much as 7% mid-week and recover all those losses by the end of the week.</p><p></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/d7b7d586998cddb8732c797a4ac5e5c3\" data-align=\"center\" tg-width=\"640\" tg-height=\"340\"/><span></span></p><p></p><p>Again, we see how the option volumes correspond to the stock&#39;s price action. More interestingly, on October 15, the call volume subsided below $130 as the put volume rose. The call volume recovered on Wednesday, and by Thursday and Friday, the call volume was the heaviest at the $140 and $139 strike prices.</p><p></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/1cbd7a0e79b9784bfe80724acfbafb5b\" data-align=\"center\" tg-width=\"640\" tg-height=\"473\"/><span></span></p><p></p><p>This past week which was for expiration on October 25, the stock price traded in a range of approximately $137 to $144, with shares rising on Monday and Tuesday, falling on Wednesday and Thursday, and rising again on Friday.</p><p></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/778f5c43c7eb12152d4be297a6e42474\" data-align=\"center\" tg-width=\"640\" tg-height=\"340\"/><span></span></p><p></p><p>Again, the options volume tracks stock movement. Puts got more active on Wednesday when the stock price was falling, with the heavier volumes shifting higher throughout the week back to the calls.</p><p></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/c6bc22ef1fdb64902a66aba637e098ee\" data-align=\"center\" tg-width=\"640\" tg-height=\"357\"/><span></span></p><p></p><p>The thing is that the weekly call volumes in Nvidia account for a vast majority of the total daily options volume trading. On October 17, about 3.1 million total call contracts were traded. The most active weekly call options on that day were the October 18 $140 calls with a volume of 481,000 contracts, while the $139 calls traded about 221,000 contracts, and the $138 and $141 strikes traded around 150,000 contracts each. That means that out of 3.1 million call contracts traded, 1.0 million of them traded in a range of $3 strike price for the weekly expiration. More importantly, total weekly contracts on that day-traded between $120 and $148 equalled more than 1.6 million contracts.</p><p></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/a4187f867e9375b93a4ae29ee587ac17\" data-align=\"center\" tg-width=\"640\" tg-height=\"315\"/><span></span></p><p></p><p>On October 14, it wasn&#39;t much different even though the call volume was just 2.2 million. That day, 1.0 million contracts traded for the weekly options, and the $140 calls traded nearly 333,000 contracts. This pattern continues through the three-week period, with the weekly options accounting for the vast majority of the overall call volume for the stock, while the most active contract in the calls options migrating with the strike price.</p><p>Perhaps more interesting is that this occurred during a time when the stock price rose by more than 13% and its 20-day average volume fell from 291 million shares per day to 253 million shares per day, with a clear trend lower.</p><p></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/aa617de20f4ac3dae1421f51d27ec63a\" data-align=\"center\" tg-width=\"640\" tg-height=\"340\"/><span></span></p><p></p><h2>Systemic Market Risks</h2><p>It may not seem like a big deal on the surface, but from 10/7 until 10/26, the Bloomberg 500 has gained 1.08%, and Nvidia has accounted for 75% of those gains, accounting for 16.7 of the 22.3 points. Without Nvidia, the index would be flat.</p><p></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/16bdf7eef113e3cecd21e7fa31a1688e\" data-align=\"center\" tg-width=\"640\" tg-height=\"203\"/><span></span></p><p></p><p>The problem, of course, is whether or not the options market is the driving force behind Nvidia stock. If that has become the case, and Nvidia stock is the driving force behind a large portion of the gains in the stock market, then really, the options trading activity in Nvidia has become the driving force of the stock market, or at least the market indexes that are determined by Nvidia&#39;s changes in market cap.</p><p>The takeaway is that the stock market may not be what it seems, and a change in Nvidia&#39;s fortune may change the entire market&#39;s fortune. Indexes with heavy exposure to Nvidia are at the most significant risk.</p></body></html>","source":"seekingalpha","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Nvidia's Stock May Pose A Systemic Risk To The Market</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nNvidia's Stock May Pose A Systemic Risk To The Market\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-10-28 11:55 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4729922-nvidia-stock-may-pose-systemic-risk-to-market><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Nvidia's stock has significantly impacted the Bloomberg 500, a proxy for the S&P 500 contributing 25% of gains this year and 75% since October 7, despite declining trading volume.Nvidia's volatility ...</p>\n\n<a href=\"https://seekingalpha.com/article/4729922-nvidia-stock-may-pose-systemic-risk-to-market\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"NVDA":"英伟达"},"source_url":"https://seekingalpha.com/article/4729922-nvidia-stock-may-pose-systemic-risk-to-market","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"2478154039","content_text":"Nvidia's stock has significantly impacted the Bloomberg 500, a proxy for the S&P 500 contributing 25% of gains this year and 75% since October 7, despite declining trading volume.Nvidia's volatility and beta have surged, making it more sensitive to market changes and increasing its influence due to its larger market cap.The options market, particularly weekly call options, appears to be driving Nvidia's stock price, raising concerns about systemic market risks.A shift in Nvidia's fortunes could affect the entire market, especially indexes heavily exposed to Nvidia, highlighting potential vulnerabilities.Nvidia's (NVDA) stock may pose a systemic risk to the broader stock market.This year alone, Nvidia accounts for 25% of the gains in the Bloomberg 500, a tracking proxy for the S&P 500, and 75% of gains since October 7. The more recent gains come when the stock's actual trading volume declines while options trading volume surges.Nvidia's outsized impact on the market is undeniable. The stock nearly tripled this year alone and contributed almost 93 points of the 372 points to the Bloomberg 500 index.Compared to Apple (AAPL), the second most significant contributor, having added just 25 points to the index, or just 6.5%. Said another way, if Nvidia gains were not made, the Bloomberg 500 would have gained only 279 points on the year, or 16.2%, instead of the current gains of 21.6%.Rising Beta and VolatilityVolatility in Nvidia stock compared to that of the S&P 500 has increased dramatically, surging to 2.4. This outpaces other MAG7 stocks like Tesla (TSLA) (2.0) and Meta (META) (1.7), underscoring its increased market sensitivity.To be fair, Nvidia has always had a higher beta than the other names, but it wasn't always a company with among the largest market caps, either. In fact, at just the start of the year, Nvidia's market cap was $1.2 trillion, versus nearly $3.5 trillion today. Given that the S&P 500 is a market cap weight index, its impacts on the overall market are much greater today than they have been in the past.Declining Stock Volume, Surging OptionsPerhaps more interesting is that stock volume has steadily declined over the past several weeks. The 20-day average volume levels fell from around 386 million on July 1 to just 253 million currently, which seems like a significant decline in overall average trading volume.More interestingly, despite the decline in overall trading volumes, options trading volume has remained fairly consistent. The daily options volume is mostly call volume, which has steadily traded around 3 million call contracts per day versus about 1.6 million put contracts per day. The put-to-call ratio has easily favored the calls since the beginning of July.The troubling part is that the majority of the options volume occurs on a daily basis in the weekly options for Nvidia. The most heavily traded call options, specifically those with the shortest number of days until expiration, are the most heavily traded. The patterns in the call volume appear to align with the stock price.For example, the weekly options expiring on October 11 saw the stock trading in a range of roughly $125 to $136. The shares started the week around $125 and steadily climbed throughout the week until reaching $135 by Thursday afternoon and stalling out.That week shows how the Nvidia puts and call options for expiration on October 11 saw their heaviest trading volumes migrate throughout the week to the highest strike prices that corresponded with the stock price moving higher.The week of October 18's expiration saw the shares traded as low as approximately $129 to $138. But this week, the shares jumped by nearly 3.5% to start the trading week, only to fall by as much as 7% mid-week and recover all those losses by the end of the week.Again, we see how the option volumes correspond to the stock's price action. More interestingly, on October 15, the call volume subsided below $130 as the put volume rose. The call volume recovered on Wednesday, and by Thursday and Friday, the call volume was the heaviest at the $140 and $139 strike prices.This past week which was for expiration on October 25, the stock price traded in a range of approximately $137 to $144, with shares rising on Monday and Tuesday, falling on Wednesday and Thursday, and rising again on Friday.Again, the options volume tracks stock movement. Puts got more active on Wednesday when the stock price was falling, with the heavier volumes shifting higher throughout the week back to the calls.The thing is that the weekly call volumes in Nvidia account for a vast majority of the total daily options volume trading. On October 17, about 3.1 million total call contracts were traded. The most active weekly call options on that day were the October 18 $140 calls with a volume of 481,000 contracts, while the $139 calls traded about 221,000 contracts, and the $138 and $141 strikes traded around 150,000 contracts each. That means that out of 3.1 million call contracts traded, 1.0 million of them traded in a range of $3 strike price for the weekly expiration. More importantly, total weekly contracts on that day-traded between $120 and $148 equalled more than 1.6 million contracts.On October 14, it wasn't much different even though the call volume was just 2.2 million. That day, 1.0 million contracts traded for the weekly options, and the $140 calls traded nearly 333,000 contracts. This pattern continues through the three-week period, with the weekly options accounting for the vast majority of the overall call volume for the stock, while the most active contract in the calls options migrating with the strike price.Perhaps more interesting is that this occurred during a time when the stock price rose by more than 13% and its 20-day average volume fell from 291 million shares per day to 253 million shares per day, with a clear trend lower.Systemic Market RisksIt may not seem like a big deal on the surface, but from 10/7 until 10/26, the Bloomberg 500 has gained 1.08%, and Nvidia has accounted for 75% of those gains, accounting for 16.7 of the 22.3 points. Without Nvidia, the index would be flat.The problem, of course, is whether or not the options market is the driving force behind Nvidia stock. If that has become the case, and Nvidia stock is the driving force behind a large portion of the gains in the stock market, then really, the options trading activity in Nvidia has become the driving force of the stock market, or at least the market indexes that are determined by Nvidia's changes in market cap.The takeaway is that the stock market may not be what it seems, and a change in Nvidia's fortune may change the entire market's fortune. Indexes with heavy exposure to Nvidia are at the most significant risk.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"}],"hasMoreComments":true,"newsSizeData":{"likeSize":12,"commentSize":1,"repostSize":1,"favoriteSize":1,"likeStatus":false,"favoriteStatus":false}}