Options Bulls Blitz Nvidia Stock During Volatile Session

Jefferies downshifted its bullish outlook on NVDA

Jan 25, 2019 at 2:24 PM
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It's been a choppy trading session for Nvidia Corporation (NASDAQ:NVDA) stock. The shares fell to their intraday lows early on a negative earnings reaction for Intel (INTC) and a downshift at Jefferies. However, NVDA stock was last seen up 1.4% at $160.07, potentially getting a halo lift from Western Digital (WDC), which is popping on an upbeat revenue forecast.

This volatile price action has sparked accelerated activity in NVDA's options pits, with roughly 147,000 calls and 75,000 puts on the tape -- double what's typically seen at this point in the day. Day traders are active, with new positions being initiated at the weekly 1/25 155-strike, 157.50-strike, and 160-strike calls.

Elsewhere, speculators may be purchasing the weekly 2/1 155-strike call for a volume-weighted average price of $5.01. If this is the case, the call buyers will begin to profit on a move above breakeven at $160.01 (strike plus premium paid). Losses, meanwhile, are capped at the initial premium paid, should NVDA stock settle south of the strike at the close next Friday, Feb. 1, when the options expire.

Today's call-skewed session only echoes the broader trend seen among Nvidia options traders. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day call/put volume ratio of 2.59 ranks in the 99th annual percentile, meaning calls have been bought to open over puts at a quicker-than-usual clip.

Elsewhere on Wall Street, analysts are mostly upbeat toward the chip stock, with 19 of 26 maintaining a "buy" or better rating. Plus, although Jefferies earlier removed NVDA from its "franchise pick" list, the brokerage firm maintained its "buy" recommendation and $246 price target -- a 54% premium to current trading levels.

It's been a rough stretch for Nvidia shares, which were trading north of $290 in early October. The stock plunged more than 57% from here to find a 19-month bottom at $124.46 on Dec. 26, but have since bounced 28.6%. What's more, NVDA is headed toward its fifth straight weekly win, the longest such streak since August.

nvda stock daily chart jan 25


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