Call Buying Reaches Extreme Levels on Nvidia

It's seemingly a great time to target near-term NVDA options

Jun 18, 2018 at 1:04 PM
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Nvidia Corporation (NASDAQ:NVDA) is trading lower today, despite more bullish commentary from the analyst community. This time it was UBS that weighed in on the chipmaker, boosting its price target $285 from $266, saying the mass adoption of facial recognition technology, especially in China, will be a boon to the company's earnings. NVDA stock was last seen down 0.7% at $263.33, possibly hurt by today's big Intel (INTC) sell-off. In the meantime, options traders will be hoping Nvidia shares make a quick comeback.

Specifically, data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows a 10-day call/put volume ratio of 2.30 for NVDA. Not only does this mean call buying has more than doubled put buying in the past two weeks, but this reading ranks in the 100th percentile of its annual range, showing an extremely rare appetite for long calls over puts.

Looking closer, the weekly 6/22 270-strike call saw one of the largest increases in open interest during this time frame. Most of these positions, according to data from the major options exchanges, were bought to open, indicating speculators expect NVDA stock to rally above $270 this week, since the contracts expire this Friday.

In today's trading, the weekly 6/22 270-strike call is again most popular, standing as the most traded contract so far. It's closely followed by the 265- and 267.50-strike calls from the same series. In fact, this weekly series accounts for the 10 most popular options today.

Bullish or bearish, now's a great time to target short-term options on the semiconductor concern. This is according to its Schaeffer's Volatility Index (SVI) of 25%, which ranks in the 1st percentile of its annual range. But Nvidia has also been good to premium buyers over the past year, since its Schaeffer's Volatility Scorecard (SVS) stands at 84, showing a strong tendency to make moves bigger than the options market was expecting over the past year. Considering the stock is up 73% in the past 12 months, touching a record high of $269.20 just last week, that volatility likely disproportionately favored bullish traders.

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