Goldman Removes NVIDIA From Conviction List Ahead of Earnings

Options traders have been extremely call-heavy towards NVDA in recent weeks

Managing Editor
Feb 1, 2018 at 10:19 AM
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Chipmaker Nvidia Corporation (NASDAQ:NVDA) is making headlines after being removed from Goldman Sachs' conviction list, exactly one week before the company is slated to report its fourth-quarter earnings. However, the brokerage firm still has a "buy" rating on the equity and expects the company to announce strong guidance when it reports. Nvidia shares have overcome early losses to trade right near breakeven, last seen at $245.70.

Taking a broader view, NVDA has had a stellar year, gaining roughly 115% over the past 12 months, and the tech stock also touched a fresh record high of $249.27 during yesterday's trading. Still, almost half the analysts covering the security have just "hold" or "strong sell" ratings in place, and the average 12-month price target sits down at $216.69.

But in the options pits, sentiment has been extremely bullish in recent weeks. Per data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), Nvidia stock sports a 10-day call/put volume ratio of 2.05, ranking in the highest percentile of its annual range. This suggests calls have been bought over puts at a faster-than-usual pace over the past two weeks. 

Echoing this, NVDA's Schaeffer's put/call open interest ratio (SOIR) of 0.81 is docked below 99% of comparable readings taken in the past year. In other words, short-term speculators have rarely been more call-skewed toward the stock. Digging deeper, two near-term calls that have seen heavy buying recently are the February 240 strike and the March 250 strike, so clearly traders expect more upside in the coming months.

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