Nio Topples Key Trendline After Revenue Beat

Nio's third-quarter loss came in lower than expected

by Patrick Martin

Published on Dec 30, 2019 at 10:02 AM

One of the best stocks on this quiet trading day is Nio Inc (NYSE:NIO), up 26.2% to trade at $3.06. The Shanghai-based Tesla rival reported a third-quarter loss that was slimmer than expected, while revenue topped expectations. China deliveries also increased, despite a reduction in vehicle subsidies. 

Nio stock is on track to fill a late September bear gap that was brought on by a dismal deliveries report. The shares have also toppled their 160-day moving average for the first time ever, and are now up 160% since an Oct. 2 bottom of $1.19. However, some perspective is needed; NIO is still down 51% year-to-date.

Because of that steep deficit, there's tons of pessimism surrounding the equity. There are six brokerages covering NIO, and five rate it a "hold" or "sell." And among short sellers, a whopping 29% of the stock's total available float is sold short, which accounts for 5.2 times the average daily trading volume. 

In the options pits, calls are heavily favored. On the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) during the past 10 days, 2.36 calls have been bought for every put. However, given the large amount of short interest tied up in the stock, some of these calls could be shorts seeking an options hedge against any unexpected upside.

Shifting gears to today, calls have exploded in popularity. In just the first half hour of trading, over 92,000 calls have changed hands, 18 times the average intraday amount and more than five times the number of puts traded. Leading the charge are the weekly 1/3 3- and 3.50-strike calls, with new positions are being opened at the latter. 


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