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Option Brief: Calls once again took the lead in NVIDIA Corporation's (NASDAQ:NVDA) options pits yesterday. By the time the dust settled, about 26,000 calls had crossed the tape -- a 43% mark-up to the average daily volume, and nearly 16 times the number of puts that traded. The most active strike was the May 19 call, as traders bet on a push into multi-year-high territory.
Of the 10,420 contracts that changed hands at this out-of-the-money (OOTM) strike, 98% did so at the ask price. Implied volatility rose 1.5 percentage points on the day, and nearly all of the volume translated into open interest overnight. Summing it all up, it seems safe to assume that new bullish positions were initiated. At last night's close, delta for the call was docked at 0.39, suggesting a roughly 2-in-5 chance the option will expire in the money at the close on Friday, May 16.
This bullish bias toward NVIDIA isn't too surprising, considering the shares have rallied roughly 43% during the past 12 months to trade at $18.20. As recently as Feb. 24, the equity hit a two-year high of $19.05, a move that came on the heels of the stock's advance through its upper Bollinger Band. The brief period of consolidation that followed was quickly contained in yesterday's session by the stock's 20-day moving average -- currently located at $18.06.
Meanwhile, with 11% of NVIDIA Corporation's (NASDAQ:NVDA) float sold short, a portion of yesterday's call buying at the OOTM strike could be a result of short sellers picking up hedges against any additional upside. Of note, the lifetime of the aforementioned calls encompasses the company's tentative fiscal first-quarter earnings report. Good news for bulls -- over the past eight quarters, NVDA has averaged respective gains of 2.3% and 3% in the day and week after unveiling its quarterly results.