Nvidia has been plunging along with the rest of the chip sector since mid-April, and at least one investor apparently doesn't think that it will rebound soon.
optionMONSTER's tracking systems detected heavy call selling in the maker of graphics chips. In particular, traders targeted the August 12 and August 11 strikes, both of which saw more than 8,000 contracts trade against virtually no existing open interest.
NVDA fell 3.75 percent to $11.56 yesterday and is down 35 percent since April 15. The company reported better-than-expected numbers on May 13 but gapped lower after management provided weak revenue guidance.
The stock now appears to be showing some signs of bottoming, especially if it can hold support at the $11.50 level where it peaked in the spring of 2009. Nonetheless, yesterday's call seller doesn't seem to expect a bounce.
He or she probably wrote the contracts against a position in the stock, letting them establish an exit price while collecting premium thanks to NVDA's 45 percent implied volatility level. For instance, the August 11 calls mostly fetched about $1.26, which raised the exit price on the stock to $12.26.
The August 12 strikes changed hands for about $0.60, translating into a sale price of about $12.60 on the shares.
Overall options volume in NVDA was six times greater than average in yesterday's session.
(Chart courtesy of tradeMONSTER)
Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.