Traders pile into 'bubble puts' on CoreWeave as neocloud stocks plunge
As a key corner of the artificial intelligence trade takes a beating on Wednesday, traders are betting it could get even worse.
Key points
- CoreWeave shares fell 15% as its bonds hit a 15% yield.
- Nebius and Iren dropped as much as 10% amid the neocloud selloff.
- Traders bought nearly 200,000 CoreWeave puts, far more than calls.
Neocloud stocks plunged Wednesday as debt yields for Nvidia-backed CoreWeave reached new highs. CoreWeave shares fell 15%, while Nebius Group and Iren dropped as much as 10%.
The declines followed a Financial Times report that CoreWeave is targeting insurance companies for more debt financing. On X, Social Capital founder Chamath Palihapitiya questioned a private credit bubble, sharing a screengrab of CoreWeave bonds at a 15% yield; Elon Musk replied "yikes."
Heavy options activity
Options volume in CoreWeave surged to more than seven times its 30-day average. Nebius saw almost four times normal volume, and Iren twice the usual amount.
In CoreWeave, traders bought just under 200,000 puts versus 106,000 calls. Around 10 a.m. ET, someone opened a new position of 26,000 37.5-strike puts expiring Dec. 18, traded near the ask price, suggesting a purchase, according to SpotGamma. The contracts sold for 74 cents each, totaling $1.9 million, and need CoreWeave to fall another 42% over two months to pay off. Before this trade, there were just over 1,000 open contracts.
These are bubble puts. These are not rip-ups that you buy thinking they'll go to zero.
— Scott Bauer, CEO of Prosper Trading Academy
What analysts said
Scott Bauer, CEO of Chicago-based Prosper Trading Academy, called the trade "bubble puts" and said they are not rip-ups bought expecting them to go to zero. He described CoreWeave as the center of the AI trade and suggested the position could be a margin play to hedge exposure in highly correlated stocks or the Nasdaq.
Bauer added that the buyer might have been in early or on the IPO, saying, "Maybe this is someone that was in early or in on the IPO saying this is my breakeven level." CoreWeave IPO'd in March 2025 at $40 per share.
