July 16 Option Market Analysis: AI Infrastructure Restructuring Amidst Momentum Sell-off
Today was a day where the decline in momentum stocks stood out.
The Goldman Sachs High Beta Momentum Index fell 24% month-over-month, the worst performance since April 2009, and the Morgan Stanley Tech Momentum Index also recorded its worst 17-day change in 27 years.
On the other hand, the S&P 500 itself maintained positive territory, supported by gains in hyperscaler stocks, suggesting that the epicenter of the decline is limited to a "momentum stock-specific unwinding" and may not have spread to the broader market.
In fact, looking at the volume rankings, large-cap tech stocks like AAPL (+4.01%), MSFT (+2.78%), META (+3.07%), and AMZN (+3.02%) were actually robust, indicating a structure where capital is shifting from momentum stocks to top market-cap names.
The PPI came in below expectations across all items. Core PPI was +0.2% month-over-month (expected +0.3%) and headline was -0.3% month-over-month (expected 0.0%), content that indicates slowing inflation and could serve as material to support rate cut expectations.
News for the 16th
Movements in the physical AI domain are notable.
Coinciding with Jensen Huang's visit to Japan, meetings were confirmed with major players in Japanese industrial robotics: Fujitsu, Kawasaki Heavy Industries, FANUC, and Yaskawa Electric. When viewed alongside the expansion of the partnership with Toyota (Omniverse digital twin at Woven City, Isaac robotics, and Nemotron LLM utilization), this is positioned as part of Nvidia's strategy to expand its AI platform from autonomous driving to factories, smart cities, and industrial robotics in general.
Nokia's 2027 AI mobile network equipment launch can also be interpreted as an expansion of the same Nvidia ecosystem.
There are movements to be wary of in the semiconductor and memory sectors.
CoreWeave is reported to be considering financial hedges against falling memory and storage prices, which is a sign that cloud operators have uncertainty regarding the outlook for DRAM and NAND prices.
Even among the top volume stocks, storage and memory-related names like MU (-8.02%), SNDK (-8.12%), WDC (-8.78%), and STX (-5.69%) were all sold off heavily, and the news is consistent with the price action.
ASML's earnings were conversely strong, and the background for raising its FY26 guidance includes expectations of a 75% increase in memory revenue; the temperature difference between the equipment side and the downstream cloud operator side is worth noting.
Regarding corporate restructuring, PYPL surged +17.20% today after receiving an acquisition proposal from Stripe and Advent at $60.50 per share, valuing the company at over $53 billion, and volume also surged to 9.05 million shares. This material is reflected directly in the options market, which will be discussed later.
Additionally, reports of Anthropic's IPO preparations (targeted for October, valuation of $96.5 billion), Apple's consideration of acquiring AI chips (strengthening server chip strategy, delay of codename Baltra), and Nebius's introduction of an asset-light cloud model (a move to shift capital burdens of data center investment to partners) are also themes in AI infrastructure investment to keep an eye on for the medium to long term.
Also, the fact that the number of listed leverage ETFs has reached a record high of 700, with 117 newly listed in June alone, indicates a market environment where volatility itself is easily commoditized and amplified, and it is necessary to be aware of this as a factor in short-term price volatility, along with the sharp drop in momentum stocks.
Options Market Analysis
In terms of top volume, NVDA (3.7 million contracts), TSLA (2.8 million contracts), and AAPL (2.5 million contracts) stood out, and these three stocks were the center of today's options market.
Several stocks with high Vol/OI (volume/open interest) ratios show movements consistent with news flow. PYPL saw buying across a wide range of strikes at 55C and 60C with Vol/OI ratios in the 17-35 range and deltas of 0.16-0.57, indicating that speculation for further upside remains even after the surge following the acquisition news.
For NVDA, the 212.50C (almost at the current price, delta 0.52) had a Vol/OI of 50.80, with volume exceeding open interest, showing that there is heavy new speculative buying near the ATM.
Also, deep ITM calls like the 190C (delta 0.9966) saw volume, which is seen as use as a de facto stock replacement position (synthetic long).
AAPL rose significantly today by +4.01%, and movements with Vol/OI in the 30-48 range were seen in short-term (expiring 7/17) puts like the 325P and 322.50P. These may be functioning as hedges for profit-taking following the rise, or as protection in preparation for a pullback after the surge.
On the other hand, call buying in longer-dated expiries like the 360C (93 days out, delta 0.28) is also visible, indicating that hedges against short-term price movements and a medium-term bullish view exist simultaneously.
As for MU, heavy volume was seen in the 905C and 915C with deltas of 0.45-0.51, which is natural as open interest formation in line with the current stock price level.
From the credit spread screener, the short-term range expected by the market can also be read.
In bear call spreads (a strategy of selling upside resistance), strikes such as TSLA 417.50C, MSFT 415C, and NVDA 222.50C, all with a loss probability of about 5-7% for the 7/17 expiry, are lined up, suggesting that market participants are aware of these levels as "upside targets that are difficult to exceed within a few days." In particular, TSLA has many similar sell orders lined up, suggesting that short-term upside heaviness is being recognized.
Conversely, in bull put spreads (a strategy of selling downside), levels such as AMD 455-480P, META 625-645P, and TSLA 365-375P are displayed on the screener as "downside support levels that are difficult to break" with a loss probability of about 5-8%. AMD has multiple strikes concentrated within this range, and the $480 level may be recognized as psychological downside support.
Furthermore, for AAPL, bull call spreads (a strategy of betting on a rise) are lined up in very large numbers across multiple expiries and strikes, and the IV rank is consistently high at 65.79%. Many have a probability of profit in the 60-67% range, indicating that bullish position building is continuing even after the short-term surge.
SK Hynix just before earnings
SK Hynix is scheduled to announce its earnings on July 22.
Recently, it has been in a pullback phase after a sharp rise, with the July 15 closing price at $176.46, a 9.00% decline from the previous day, and further losses continued in after-hours trading.
Checking the positioning in the options market at this timing provides a reference for predicting the range of price fluctuations after the earnings announcement.
This shows the gamma exposure by strike price, with the blue line representing the aggregate gamma exposure.
The current price of 176.46 is below the gamma flip level of 182.46 indicated by the red line; below this level is the negative gamma region, and above it is the positive gamma region.
Being in the negative gamma region means that the dynamics are such that dealers, who are the sellers of options, are more likely to issue additional hedge sells as the stock price falls and are more likely to issue hedge buybacks as the stock price rises.
This does not indicate directionality itself, but it is appropriate to understand it as a state where price movements are easily amplified. Being in the negative gamma region at this timing, ahead of an event like an earnings announcement where price movements tend to be large, suggests that the volatility is likely to be high regardless of which way the reaction goes after the earnings.
Conversely, if the stock price exceeds 182.46 and enters the positive gamma region, dealer hedging will work in a direction that suppresses price movements, making them relatively easier to stabilize.
This is the same gamma exposure displayed separately for calls (blue) and puts (orange).
Straddling the current price, a prominent large negative exposure on the put side can be seen near the 150 strike, while a large positive exposure on the call side can be confirmed near the 190 strike.
The thickness of the 150 strike put is the largest bias in this entire chart. Since it is close to the level before the sharp rise and also close to the 52-week low ($151.30), it is considered to have the character of a protective put held by holders who gained unrealized profits from the recent sharp rise to protect their gains, rather than a speculative bet on a decline.
On the other hand, the thickness of the call near the 190 strike is located at a level slightly above the 182.46 gamma flip, and it may function as a guide for the upside if the stock price breaks out upward following the earnings.
Looking at these two together, it can be read that the SK Hynix options market is positioned with an awareness of range and volatility rather than direction, characterized by 'put demand as position adjustment/insurance before earnings' and 'concentration of calls that could become upside resistance in case of an upward breakout'.
Whether the stock price can recover to 182.46 after the earnings announcement seems to be one of the milestones that will determine the subsequent stabilization of price movements.
Conversely, if it falls below $150 after the earnings, it will be the timing when the put options acting as insurance are triggered all at once. Option sellers (securities firms) will need to sell stocks themselves for risk management as the stock price falls. In this case, it is likely to be a development that is pushed downward vigorously by one stage.
Worse yet, there is no other 'insurance wall' of similar thickness below $150. Therefore, once it breaks through this wall, there is no cushion to stop the decline for a while, and there is a risk of a major sharp drop driven solely by supply and demand dynamics.
Summary
Today, behind the superficial impact of the sharp drop in momentum stocks, the composition was that funds were heading toward large-cap tech and AI infrastructure-related stocks.
In the options market as well, it can be said that it was a day with high consistency with the news flow, such as immediate response to PYPL's acquisition material, active open interest formation near ATM for NVDA and AAPL, and cautious put demand for memory/storage-related stocks. In the short term, the levels that appeared in the credit spread screener are likely to serve as a guide for the upside line for TSLA and NVDA, and the downside line for AMD and META.
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