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NVIDIA Corporation (NVDA) Attracts Bearish Short-Term Traders

Weekly put volume ramps up on NVDA

by 3/15/2013 10:26 AM
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Bearish speculators piled on to NVIDIA Corporation (NASDAQ:NVDA - 12.66) yesterday, as close to 8,400 puts crossed the tape -- a 30% increase over the equity's average daily put volume. Meanwhile, just over 5,300 calls were exchanged. Leading the pack was the weekly 3/22 13-strike put, where 5,255 contracts traded at a volume-weighted average price (VWAP) of $0.38.

Delving deeper into the data, it looks as though most of the puts changed hands at the ask price, while open interest at this strike soared by 5,250 contracts overnight -- signaling that most of the volume was made up of new positions. In order for traders to realize a profit on their put purchases, NVIDIA must fall south of $12.62 (strike price less the VWAP) by the close on March 22, when these weekly options expire. This is just a stone's throw away from the stock's current price.

From a broader sentiment scope, however, calls have been the options of choice on the graphic chip maker. In fact, data pulled from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows a 20-day call/put volume ratio of 3.27 for NVDA. In other words, traders have bought to open more than three calls for every put during the last four weeks.

As a result, Schaeffer's put/call open interest ratio (SOIR) for NVDA checks in at 0.37, with calls nearly tripling puts among the front three-months' series of options. This ratio is docked in the 39th percentile of its annual range, denoting a stronger-than-typical preference for short-term calls over puts lately.

NVIDIA Corporation hasn't had much to brag about on the technical front, considering the stock's modest year-to-date gain of just over 3%, as well as its year-over-year loss of more than 13%. Furthermore, the equity has trailed the broader S&P 500 Index (SPX) by nearly 7 percentage points during the past three months. Should the shares continue to retreat, the aforementioned weekly put players could end up collecting a profit on their bearish positions within the next several days.


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