Trading in bullish options contracts tied to two small-capitalization companies owned by chipmaker Nvidia Corp. surged last week just days before the company released a routine filing.
Nvidia’s 13-F Filing Triggers Rally
Nvidia’s first 13-F filing with the U.S. Securities and Exchange Commission last Wednesday triggered a rally in the shares of the two companies, leaving the buyers of these call options with substantial gains as the contracts were set to expire.
Key Details:
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Nano-X Imaging (NNOX): Before February 12, options volume for bullish call options tied to NNOX, a small Israeli medical-device company, was virtually nonexistent. However, trading in calls with a strike price of $7.50 surged dramatically, ultimately resulting in significant gains as shares soared.
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SoundHound (SOUN): Call options tied to SoundHound also saw a spike in demand that began before the filing’s release, leading to substantial gains as shares rose.
Remarkable Gains and Market Movement
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Nano-X Imaging saw its shares surge over 95% between February 12 and February 16, reaching $12.95. Call options purchased for 17 cents apiece on February 12 were worth $5.50 each by the expiry date, marking a gain of over 3,000%.
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SoundHound registered a nearly 70% increase in share price between February 14 and February 16, coinciding with a surge in demand for call options tied to the company.
Unveiling Opportunities and Insights
The spike in demand for these call options was noteworthy and reflected the market’s response to Nvidia’s disclosure of positions in SoundHound AI, Arm Holdings, and other stocks. This activity was previously reported by The Financial Times.
Nvidia’s Mysterious Investments
The SEC’s Edgar Platform does not reveal Nvidia’s 13-F filings dating back to 2001, leaving a void in understanding the history and recent changes in the company’s investments.
Small Ownership Revealed
Even without the full picture, it is known that Nvidia has held small positions in New York-listed companies such as Nano-X and SoundHound for years. The chipmaker’s support was highlighted during SoundHound’s public debut through a merger with a special-purpose acquisition company in 2022.
Unusual Market Behavior
Experts, like Henry Hu of the University of Texas, observed an interesting trend in the market. Some traders seemed to be banking on exploiting others’ reactions to minor news related to Artificial Intelligence, which they referred to as “the magic dust of AI”.
Trading Surge Signals
Prior to Nvidia’s filing, trading activity in Nano-X and SoundHound saw a significant surge. Shares of SoundHound experienced a substantial increase in trading volume, surpassing 37.5 million shares between Feb. 8 and Feb. 9, further peaking at 38.4 million on Feb. 14.
Dramatic Volume Spikes
Nano-X witnessed even higher spikes as its trading volume skyrocketed from 412,241 shares on Feb. 9 to 3.9 million shares on Feb. 12. This frenzy intensified reaching a staggering 47 million shares on Feb. 15, coinciding with a remarkable 50% surge in share prices.
Modest Holdings
Despite the buzz surrounding these stocks, Nvidia’s holdings were relatively modest. As of the filing deadline on December 31, the company’s stake in Nano-X was valued at approximately $400,000, while its investment in SoundHound amounted to $3.7 million.
Market Corrections
As the excitement receded, Nano-X’s shares experienced a sharp decline of over 20% on Tuesday, closing at $10.34, while SoundHound AI saw a minor uptick of 4.5%, ending the day at $3.99.
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