The Big Bearish Bet On NVIDIA Corporation

NVIDIA Corporation is fresh off another three-year high


Published on Nov 28, 2014 at 10:12 AM
Updated on Apr 20, 2015 at 5:32 PM

NVIDIA Corporation (NASDAQ:NVDA) has been on a technical rampage, notching a series of higher highs in recent sessions -- including today's new three-year peak at $21.00. On Wednesday, the shares tacked on 1.7% to close at $20.92 -- after hitting a now-surpassed multi-year milestone of $20.94 -- bringing its year-over-year lead north of 33%. However, one options trader expressed doubts by buying to open the weekly 1/2 19.50-strike put.

Taking a quick step back, puts crossed the tape at triple the expected rate on Wednesday, and about twice the pace of calls. What's more, NVDA's 30-day at-the-money implied volatility rose 3.4% to 23.7%, signaling elevated demand for short-term strikes.

Roughly a half-hour before the close, a sweep of 6,791 weekly 1/2 19.50-strike puts changed hands at the ask price, suggesting buyer-driven activity. Almost all of this volume translated into open interest this morning, making it safe to assume bearish bets were initiated -- a theory confirmed by Trade-Alert. Long story short, this put buyer anticipates NVDA will dip below $19.50 by the close on Friday, Jan. 2, when the weekly series expires.

Given NVIDIA Corporation's (NASDAQ:NVDA) technical tenacity, however, the trader may have other intentions. Specifically, it's possible the out-of-the-money put buyer is actually a shareholder attempting to protect his long stock position against an unexpected sell-off over the next month or so.

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