Shares of graphics processing company Nvidia (NVDA) have been hit hard with the recent tech market selloff. One trader sees share reversing higher in the next month.
That’s based on the February $235 calls. With 23 days left until expiration, 9,309 contracts were traded compared to an open interest of 304, for a 31-fold gain in shares. The buyer of the options paid $15.23 to make the trade.
Shares of the company recently went for just about $235, making this an at-the-money option. On a rally higher in shares, the option should move dollar-for-dollar higher with shares, less any change in time premium and implied volatility.
Nvidia has been a long-term winner in the market, but has been prone to large and sharp pullbacks in the share price. With a recent selloff potentially ending, shares could rocket higher and the option with them in the coming days.
Action to take: Shares are an attractive play on a number of tech trends, so investors may want to consider adding shares on any dip including the most recent one. The stock pays a paltry dividend yield of less than 0.1 percent, however.
For traders, the call options look attractive based on the market’s short-term setup. A potential rebound in the coming weeks could lead to mid-to-high double-digit returns on the call option, although traders will likely want to take profits quickly just in case the stock market doesn’t recover too quickly from its latest selloff.
Disclosure: The author of this article has a position in the company mentioned here, and may further trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.