Option Bears Circle Facebook, Nvidia

Wells Fargo said it sees NVDA experiencing a sharp decline in sales growth

Managing Editor
Apr 2, 2018 at 2:30 PM
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Social media giant Facebook, Inc. (NASDAQ:FB) and chip maker Nvidia Corporation (NASDAQ:NVDA) have suffered alongside the broader tech sector in recent weeks. The volatile price action has sparked interest from options traders, too.

In fact, both FB and NVDA popped up on the list of 20 stocks that saw the heaviest options volume during the past 10 trading days. Data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White.

MAO Chart Most Option Volume

FB Put Options Volume Soars Following Recent Scandal

At last check, Facebook stock was trading down 2.8% at $155.36, after Pivotal Research slashed its price target to $138 from $152, citing expectations for slower-than-anticipated second-half revenue growth. The shares have now shed 20% since their Feb. 1 record high of $195.32, and surrendered a foothold atop the formerly supportive 200-day moving average since a reaction to the Cambridge Analytica scandal sparked its mid-March bear gap.

Looking towards options, speculators have been bracing for more losses. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows FB with a 10-day put/call volume ratio of 0.66, ranking in the 97th percentile of its annual range. This suggests puts have been purchased relative to calls at a faster-than-usual clip during the past two weeks.

Amid FB's recent technical troubles, though, it's become pricey to purchase short-term put options. The stock's 30-day implied volatility (IV) skew was most recently seen at 41.9% -- in the 99th annual percentile, meaning calls are pricing in lower volatility expectations than puts.

Wells Fargo Sees Declining Sales Growth for Nvidia

Shares of NVDA are down 5% at $220.07, at last check, after Wells Fargo said it sees the company experiencing a sharp decline in sales growth, partly due to declining cryptocurrencies. From a long-term standpoint, however, that stock has still more than doubled year-over-year, and touched a fresh record high of $254.50 on March 13.

Still, amid NVDA's recent chop and broader tech woes, options buyers have been upping the bearish ante. Data from the ISE/CBOE/PHLX shows Nvidia stock sporting a 10-day put/call volume ratio of 0.78, ranking in the 93rd percentile of its annual range. This suggests that while calls still outnumber puts on an absolute basis, NVDA puts have been purchased over calls at a faster-than-usual clip during the past two weeks.

Further, NVDA has a 30-day IV skew of 13%, ranking in the 98th annual percentile. This means volatility expectations priced into call options are actually much lower than normal when compared to puts.

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