Unusual Options Activity: Nvidia (NVDA)

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.

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  • 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.

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  • 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.

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