Shares of graphics processing company Nvidia (NVDA) have been knocked down heavily from their highs, and are now down year-over-year. One trader sees a further decline in the coming weeks.
That’s based on the July 22 $155 puts. With 32 days until expiration, 16,161 contracts traded compared to an open interest of 213, for a 76-fold rise in volume on the trade. The buyer of the puts paid $11.60 to get into the trade.
Shares last traded for about $156, so this is an at-the-money trade. Shares will need to drop at least $10 for the option to expire with any value in the next month. In current market conditions, that could lead to solid returns on the option.
The drop in shares has brought the company’s valuation from 92 times earnings to just under 30 times earnings.
Action to take: Shares are nearing a 52-week low, which would make for an attractive long-term entry price based on the company’s prospects in the years to come. However, there’s likely slightly more downside in the weeks ahead, so buyers should look to get in on another downswing in markets.
For traders, the puts are a decent downside hedge in the coming weeks. They can likely deliver mid-double-digit gains, depending on how much more markets sell off. Traders should look for a quick chance to profit on the downside in the weeks ahead.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.