Nvidia Call Traders Take Action Ahead of Earnings

The August 280 call saw one of the largest open interest rises during the past two weeks

Aug 13, 2018 at 3:56 PM
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Nvidia Corporation (NASDAQ:NVDA) is scheduled to report earnings after the close this Thursday, Aug. 16, and the shares will try to shake off their 2.2% post-earnings pullback from May. On top of this, NVDA dipped 5.3% after earnings this time last year. Nevertheless, options traders have been turning to calls in recent sessions.

For instance, the strikes that saw the two largest increases in open interest in the last two weeks are the September 250 and 255 calls, where a number of spread trades appear to have taken place. Following those two calls is the August 280 call, but data from the major options exchanges shows mainly sell-to-open activity here, suggesting some traders may be betting on a post-earnings volatility crush. Consider that the $280 level corresponds with a 9.3% move from NVDA stock, roughly in line with the implied earnings deviation being priced in by the options market.

Traders have certainly been buying calls, as well. Take the equity's 10-day call/put volume ratio of 1.74 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Not only does this show that call buying handily outpaced put buying during the past two weeks, but it ranks in the 78th annual percentile, showing such heavy call buying is unusual.

Nvidia stock was last seen trading up 0.5% at $256.18, after Cowen reiterated its "outperform" rating -- citing expectations for an earnings beat. The brokerage firm also added NVDA stock its "Top Picks" ahead of the launch of the company's new Turing graphic chips.

Plus, the shares earlier topped out near the $260 level, which has acted as a ceiling in recent sessions like it did -- briefly -- back in May. Of course, the security eventually overcame this technical hurdle and rallied to a record peak of $269.20 on June 14, and despite pulling back some since this milestone, it's maintained its series of higher lows from the past year.


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