Shares of graphics processing unit manufacturer Nvidia (NVDA) have lost nearly half their value in the past year. One trader sees a further decline in the weeks ahead.
That’s based on the February 3 $150 put. With 24 days until expiration, 7,958 contracts traded compared to a prior open interest of 327, for a 24-fold rise in volume on the trade. The buyer of the puts paid $8.75.
Shares recently traded for about $150, making this an at-the-money trade. The stock is off a 52-week high over $289 per share, with a 52-week low of $108 per share.
Earnings have slid 72 percent in the past year and revenues are down 17 percent. With the market in an overall downtrend, it’s possible that this trade could play out in the coming weeks, especially after Friday’s jump higher in shares.
Action to take: While the company is an industry leader, in today’s markets, those interested in buying can likely get into shares at a lower price, with $125 as a reasonable price to start buying shares.
For traders, these at-the-money puts can likely deliver mid-double-digit returns in the coming weeks. Traders should look for a big down day for the stock to take a quick profit, no matter the size, given the ongoing market volatility.
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.