Nvidia Gets Dumped Before Valentine's Day Earnings

NVDA puts have been active since the company lowered guidance

by Lillian Currens

Published on Feb 11, 2019 at 3:27 PM

The shares of Nvidia Corporation (NASDAQ:NVDA) are sliding in afternoon trading -- down 1.4% at $146.14, at last check -- after Bernstein cut the semiconductor name to "market perform" from "outperform," and trimmed its price target to $175. The downgrade follows Nvidia's recently slashed fourth-quarter guidance, based partly on lessening demand in China. The company is set to report its fourth-quarter earnings on Valentine's Day -- Thursday, Feb. 14. 

While NVDA calls are outnumbering puts in today's trading, it looks like options traders have tended toward bearish bets of late. Nvidia is on Schaeffer's Senior Quantitative Analyst Rocky White's list of stocks that have attracted the highest options volume during the past 10 days, with names highlighted in yellow new to the list. As you can see, roughly 1.1 million NVDA puts changed hands, compared to just 770,843 calls. 

 Most Active Options Feb 11

In fact, data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows that Nvidia stock's 10-day put/call volume ratio of 0.76 ranks in the 83rd percentile of its annual range. This indicates that while bought calls have exceeded puts on an absolute basis in the past two weeks, options traders have been ramping up their bearish bets of late. 

Drilling down, it looks like the February 135 strike is the most popular among both put and call traders, with about 16,400 puts and 17,000 calls in open interest. Over the past 10 sessions, though, the March 140 put has seen the biggest increase in open interest, with more than 10,300 contracts added.

The equity has suffered a number of bear gaps in the last several months -- the most recent coming on Jan. 28, after the aforementioned guidance cut -- and dropped more than 50% in the fourth quarter alone. While Nvidia shares are still up more than 9% year-to-date, recent rebound attempts have stalled around its 60-day moving average. 

NVDA stock chart feb 11

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