NVIDIA Stock Pullback Could Signal Call Buying Opportunity

Earlier this week, semiconductor stock NVIDIA Corporation (NASDAQ:NVDA) pulled back to its 40-day moving average, a trendline that's been ushering the shares higher for almost a full year. While this hasn't historically been a strong signal in the short term, it could be predicting some hefty gains in the weeks ahead. According to Schaeffer's Senior Quantitative Analyst Rocky White, NVDA has pulled back to this trendline eight times in the past three years. After such a signal, the shares have seen an average 21-day return of 11.6%, ending positive 75% of the time. A repeat performance would have the stock heading back toward record-high territory.

NVDA has been a monster on the charts over the past 12 months, nearly quadrupling in value. The shares hit an all-time peak of $120.92 earlier this month, and have since been taking a breather, off 2.6% at $106.18 today. Despite the long-term outperformance, however, not everyone is in NVIDIA's bullish corner.

Among 26 analysts following the security, almost half rate NVDA a "hold" or worse. A round of upgrades could give the shares a boost. Meanwhile, short interest is still somewhat elevated, representing more than 7% of the stock's available float, even after these bearish bets fell by nearly 50% since mid-December.

Options traders have been unusually interested in NVDA puts in recent weeks. Across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity holds a 10-day put/call volume ratio of 0.78 -- near the top quartile of all readings from the past 12 months. Of course, given the stock's unbelievable technical success, it's likely some of this put activity is the result of shareholders protecting paper profits. 

No matter the motive, these options traders have been taking advantage of the attractive opportunity NVDA is presenting at the moment. With a Schaeffer's Volatility Index (SVI) of 33% -- in the low 13th percentile of its annual range -- NVIDIA Corporation's (NASDAQ:NVDA) near-term options are pricing in unusually low volatility expectations. What's more, a Schaeffer's Volatility Scorecard (SVS) of 96 suggests the options market has been notably underpricing the stock's ability to make outsized moves on the charts over the last 12 months.