<div id="readability-page-1"><div><p>There's a popular saying in the options pits: Sell a tiny, buy a Lamborghini.</p><p>It refers of course to the practice of selling dollar cheap out of the money options and collecting the premium for a high probability bet. As those tinies grow, you make a small fortune over time. Of course, there's a flip side to that, the investors who bought those worthless options.</p><p><span id="SpecialReportArticle-QuoteInBody-1">Nvidia<span><span id="-WatchlistDropdown"></span></span></span> price action Monday is a good illustration of that concept.</p><p>Options traders in Nvidia are on pace for another rough session as the stock drops Monday, down more than 6.5% from highs on Thursday and rendering some of the most popular short-term contracts worthless – again.</p></div><div><p>Upwards of 15% of Nvidia options traded by midday Monday were contracts expiring at the end of the session, according to data compiled by SpotGamma. Among the most popular contracts were the 225 and 222.5-strike calls, each of which traded more than 220,000 times and were set to expire worthless after closing in the money on Friday. It's a repeat of Friday's session, when $114M of premium in the 235-strike calls slipped out of the money.</p><p>Bulls don't seem dismayed despite the weakness. Nvidia options were the fifth-most traded in the market Monday, trailing the benchmark indexes and Tesla, with more than 3 million in contracts traded and total premium worth over $1.3 billion. Of that, $1 billion was tied to calls.</p><p>Call volume outpaced puts by more than double on Monday, though more calls were exchanged at the bid or below, meaning likely sold, according to ThinkOrSwim data.</p><p>Still, the four biggest options trades in the stock were all bullish call-buyers of expensive, in-the-money contracts expiring Friday, each totaling at least $10 million.</p><p>Traders expect a 6.25% swing based on implied volatility around earnings, on par with usual expectations but larger than the average realized move of 3.2%, according to Cboe LiveVol data. A larger-than-expected move might save options traders a lot of money. </p><p>For those holding call contracts, they'll need a change of pace: Nvidia's dropped after the past three reports, including a 5.5% decline in February.</p></div><div><p>Choose CNBC as your preferred source on Google and never miss a moment from the most trusted name in business news.</p></div></div>

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<p>Nvidia options traders face challenges as the stock dropped over 6.5% on Monday, rendering many short-term contracts worthless. Despite this, call volume outpaced puts by more than double, indicating bullish sentiment. Traders anticipate a 6.25% swing based on implied volatility around earnings, which is larger than the average realized move. The market remains active with over 3 million contracts traded, reflecting ongoing interest in Nvidia options.</p>

- The article discusses the tendency of options traders to sell low-cost, out-of-the-money options, exemplified by recent activity in Nvidia options as the stock dropped over 6.5%.  
- Despite options expiring worthless, traders remain optimistic, with Nvidia options ranking high in market activity and a notable call volume surpassing puts.  
- Analysts predict a potential 6.25% price swing based on implied volatility surrounding earnings, indicating that a significant movement could benefit options traders.

Nvidia bulls mount uphill battle into earnings