Options Traders Unfazed by Nio Stock's Pullback

Nio is set to report earnings after the close today

Assistant Editor
Mar 1, 2021 at 3:18 PM
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The shares of electric vehicle-maker Nio Inc (NYSE:NIO) are up 8.7% to trade at $49.77 at last check, ahead of the company's fourth-quarter earnings report, due out after the close today. After the stock ran out of steam at the $65 level mid-February, NIO has taken a breather on the charts. However, long-term support at the 120-day moving average contained the pullback, and Nio stock remains up an absurd 1,107% year-over year.

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Meanwhile, the options pits are pricing in a post-earnings swing of 16%, regardless of direction, which is slightly higher than the 14.7% move averaged after the last two years of reports. Prior to the earnings event, in which Wall Street anticipates losses of seven cents per share, the security has seen a surge in options volume. 

In fact, Nio stock has landed on Schaeffer's Senior Quantitative Analyst Rocky White's list of stocks that have attracted the highest weekly options volume within the last two weeks, with new names to the list highlighted in yellow. According to White, 967,630 calls and 489,506 puts were exchanged over this two week time period. The most popular option during this time was the February 60-strike call. 

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Calls are continuing to outnumber puts during today's trading. So far, 306,000 calls and 143,000 puts have crossed the tape. The weekly 3/05 50-strike call is the most popular, followed by the 55-strike call in the same series, with new positions being opened at both. This suggests these traders could be speculating on a bounce for NIO by the time these contracts expire at the end of this week. 

The good news for options traders is that the equity's Schaeffer's Volatility Scorecard (SVS) sits all the way up at 96 out of 100. This means the stock has greatly exceeded option traders' volatility expectations during the past year.

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