Options traders are souring on chipmaker Nvidia’s (NVDA) stock.
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Traders have been selling big volumes of NVDA “call” options in recent days even as the share price hit a new all-time high. Market data shows that, on January 7, options traders sold 200,000 lots of $140 calls that expire on January 17, along with 700,000 contracts with February 21 expiries that would allow investors to buy shares at $159 to $165.
Call options are bets that a stock’s price will rise by a certain date. Essentially, the options traders have been selling contracts that would allow them to buy NVDA stock at higher prices than where it currently trades over the next two to six weeks. This is an indication that traders now expect Nvidia’s share price to decline in coming weeks after hitting a record high of $153.13.
Negative Sentiment
The heavy selling among options traders contributed to NVDA stock falling 6.2% on January 7. The selling came shortly after Nvidia CEO Jensen Huang spoke at the annual Consumer Electronics Show (CES) in Las Vegas, where he introduced new microchips for video games and talked about issues ranging from artificial intelligence (AI) to robots.
Total trading in Nvidia options contracts reached 6.73 million after Huang spoke, the highest volume since November 21. Data shows that options traders have been shifting their bets on NVDA stock to bearish “puts,” which are bets that a stock’s price will decline.
NVDA stock has risen 164% over the last 12 months.
Is NVDA Stock a Buy?
The stock of Nvidia has a consensus Strong Buy rating among 40 Wall Street analysts. That rating is based on 37 buy and three Hold recommendations assigned in the last three months. The average NVDA stock price target of $177.03 implies 26.22% upside from current levels.
Read more analyst ratings on NVDA stock
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
