Equity holder buys puts as a hedge from a market maker. Market maker sells puts and shorts shares to stay market (delta) neutral.
The equity holder could also just sell their shares instead of hedging with puts, but that's a taxable event. Hedging with puts is not.
Think of it this way. You have nvidia shares, think the stock has ran up too quickly, want to sell, but also don't want to because of taxes. So you approach your neighbor and get him to short nvidia for you, and you agree to pay your neighbor a fixed amount for his trouble and your neighbor passes the money made/lost by shorting back to you. Now your effective share count is 0 and you don't have to pay taxes on unrealized gains.
The point is that people wrongly assume that short interest in nvidia must mean people are betting against nvidia, when it's much more likely most short interest belongs to people who are bullish.
The equity holder could also just sell their shares instead of hedging with puts, but that's a taxable event. Hedging with puts is not.
Think of it this way. You have nvidia shares, think the stock has ran up too quickly, want to sell, but also don't want to because of taxes. So you approach your neighbor and get him to short nvidia for you, and you agree to pay your neighbor a fixed amount for his trouble and your neighbor passes the money made/lost by shorting back to you. Now your effective share count is 0 and you don't have to pay taxes on unrealized gains.
The point is that people wrongly assume that short interest in nvidia must mean people are betting against nvidia, when it's much more likely most short interest belongs to people who are bullish.