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Option Brief: NVIDIA Corporation (NASDAQ:NVDA) call volume is trading at six times the intraday average, as bulls once again scramble to place bets on the semiconductor concern. By the numbers, about 14,000 calls are on the tape so far, compared to fewer than 1,100 puts. Diving deeper, it appears two speculators are responsible for the lion's share of this early call action, as they bet on a continued rise for an equity that's already up 17% year-to-date.
Seeing the most activity is NVDA's weekly 5/9 19-strike call, where 6,479 contracts have traded. The majority of this volume occurred in one fell swoop, when a block of 5,000 contracts went off at the ask price at $0.06 apiece. Plus, implied volatility surged 26.4 percentage points at the transaction, collectively inferring buy-to-open activity. Breakeven for the block trader at Friday's close -- when the weekly options expire -- is $19.06 (strike plus premium paid), or 1.8% above the equity's current perch at $18.73.
Separately, it appears another speculator utilized the weekly 5/9 19-strike call to initiate a bullishly biased two-legged spread with NVDA's weekly 5/9 18.50-strike call. Specifically, a block of 1,000 of the higher-strike calls was sold for $0.07 apiece, while a symmetrical block of the lower-strike calls was bought for $0.17 each. IV rose more than 21 percentage points at each leg, pointing to the initiation of new positions.
By establishing this bull call spread, the trader is hoping NVIDIA Corporation (NASDAQ:NVDA) finishes the week at or above $19, but not so far north that she regrets not playing a long call outright. In this best-case scenario, she will be able to pocket the full potential reward of $0.40 per pair of contracts (difference between the two strikes less the net debit of $0.10). However, she will still be able to profit, as long as NVDA remains above the breakeven mark of $18.60, which is the bought strike plus the net debit, through tomorrow's close. Risk, meanwhile, is capped at the initial cash outlay, should the shares descend below the bought strike.