Schaeffer's Trading Floor Blog

Stocks to Watch Friday: NVIDIA Corporation, Zillow Inc, and Ariad Pharmaceuticals, Inc.

Analyzing NVDA, Z, and ARIA ahead of tomorrow's trading

by 6/12/2014 5:01 PM
Stocks quoted in this article:

Momentum names that made notable moves on Thursday and could continue to do so into Friday's session include chip maker NVIDIA Corporation (NASDAQ:NVDA), real estate resource Zillow Inc (NASDAQ:Z), and oncology concern Ariad Pharmaceuticals, Inc. (NASDAQ:ARIA). Here is a quick look at these stocks ahead of tomorrow's opening bell.


While NVIDIA hit a three-year-high of $19.61 today -- and later closed the session at $19.52 -- options enthusiasts exchanged more than two times the expected daily amount of calls. Specifically, call players zeroed in on July-dated options, which accounted for the three most active strikes -- some of which appear to have been bought to open. This activity is par for the course for NVDA. The stock's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio comes in at a 12-month peak of 21.94 -- demonstrating an annual-high rate of call buying, relative to put buying, during the last two weeks. However, given that 9.7% of the equity's float is sold short, some of this call buying may have come at the hands of hedging short sellers.

Zillow Inc (NASDAQ:Z)

Zillow ran to a record high of $126.30, after this morning introducing a "Coming Soon" inventory feature to its online marketplace; however, the equity finished the session 2.5% lower at $120.10. Meanwhile, call volume on Z spiked to more than two times what is typically seen on a daily basis, but it is possible short sellers -- picking up insurance against additional upside -- are responsible for some of the long call activity. Short interest currently makes up a whopping 38.1% of Z's available float, and it would take more than a week to cover these bearish bets, at the shares' average daily volume.

Ariad Pharmaceuticals, Inc. (NASDAQ:ARIA)

Ariad plunged 8.7% today to close at $6.41, after this morning pricing a $200 million offering of convertible senior notes due 2019, and receiving a subsequent price-target cut to $7 from $7.50 at UBS. In response, speculators flooded ARIA's options pits, trading contracts at nearly three times the average daily pace. Interestingly, the most active option was the January 2015 10-strike call, where it appears the contracts were bought to open in hopes of ARIA surging past $10 over the next seven months (though the calls may also be protective, given that 24% of the equity's float is sold short). From a broader standpoint, the stock's top-heavy 10-day ISE/CBOE/PHLX call/put volume ratio of 52.91 ranks in the top 4% of its annual range, indicating a heavier-than-usual demand for long calls over puts in recent sessions.

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