Today, there has been some notable and unusual trading activity in Nvidia Inc (NVDA) put options, signaling increased interest and accessibility for investors as the company prepares for its 10-for-1 stock split on June 7. As a result, NVDA's stock price has risen by approximately 3% to $1,199.44 during midday trading on June 5.

Over the past month and a half, starting from April 22 when NVDA was trading at $764 per share, the stock has seen a remarkable surge of 56.8%. Furthermore, since the company released its fiscal Q1 results on May 22, along with the announcement of the stock split, NVDA's stock has climbed by 26.2% from $949.50 per share.

The upcoming stock split, scheduled to take effect on June 7 after market close, will result in a 10-for-1 basis split. This means that when trading commences on Monday, June 10, the stock price will be 90% lower than its closing price (equivalent to 1/10 of the prior price). Consequently, option strike prices will also be adjusted proportionally, making it easier for investors to buy and sell puts and calls since each contract represents 100 shares.

Previously, the high volatility in NVDA stock led to options premiums with significant dollar values. For instance, a put premium of $12.20 would now be adjusted to $1.22 following the stock split. This reduction in premium cost, from $1,220 to $122 per contract, is expected to stimulate more trading in puts and calls. Additionally, short sellers of puts and calls will not be required to have as much capital. With the stock split, short sellers will only need to secure $1,185 per contract on a put strike price of $1,185 as opposed to the previous $118,500. The same applies to covered calls.

This adjustment makes shorting out-of-the-money puts and calls more accessible, enabling investors to exercise their options with a lower capital requirement. Consequently, the unusual activity observed in NVDA puts and some calls today is likely a result of traders taking advantage of the high options premiums by shorting them.

The Barchart Unusual Stock Options Activity Report shows that there are 4 put tranches and 1 call option demonstrating highly unusual trading activity in NVDA. Remarkably, each of these strike prices is out-of-the-money (OTM), with the put strike prices being below the current stock price and the call strike price being above it. It is worth noting that all of these tranches have a closing expiration date of June 7.

The number of contracts involved in this unusual activity is significantly higher, ranging as much as 83 times the outstanding contracts before today. This suggests a strong interest among traders in taking advantage of the high options premiums prior to the stock split.

Amidst all this, it is important to consider the potential future growth of NVDA stock. Previous analysis has indicated that the stock still appears undervalued. Indeed, in a previous Barchart article, it was suggested that NVDA stock could be worth as much as $149 post-split, based on the company's strong free cash flow (FCF) and conservative estimates. The projected growth assumes a robust FCF margin of 53.5% on a next 12-month revenue forecast of $137.69 billion.

Ultimately, the upcoming stock split has generated significant interest in NVDA options, facilitating greater participation and accessibility for investors. As the company prepares for the split, analysts continue to underscore potential growth opportunities for NVDA stock.