Nvidia Corporation. (NVDA), Trending Stock Report

Nvidia Corporation (NVDA) is trending in news and social media after the stock declined nearly 13% since June 18th. Looking at the chart below, the 1-month implied volatility (the lower green line) bounces back and forth between 40 and 60. Last December the lows were in the 30’s. Looking at this time series chart, we can see that the volatility expectations typically rise near 60 in anticipation of an earnings report, then fall to near 40 after the earnings are announced.

The recent decline in the stock price has caused volatility expectations to rise. From the peak last Thursday to this Friday’s options expiration is 9 trading days. Over the past year, the largest drop in NVDA shares over 9 trading days was -13.05%. This current action sets up a high probability trade where we can profit if the stock does not drop -18% below its recent high.

This MDM graph compares the modeled expectations of current options prices (the orange line) to the actual movement of NVDA’s stock price over the past year. You can see that the actual behavior (the blue histogram) did not make big moves as often as the modeled options prices expect. This graph tells us the NVDA options expiring on June 28^th are expensive compared to the historical performance of NVDA’s actual price movement.

This Volatility Cone shows us that the volatility expectations (the yellow dots) are above average historical volatility. To learn more about the Volatility Cone, click here. This indicator suggests that options at every term for the rest of the year are relatively expensive.

This Volatility Term Structure shows us the volatility expectations at each expiration. To learn more about Volatility Term Structure, click here. This chart shows us that the most expensive options relative to all other expirations are those that expire this Friday, June 28th.

NVDA is always in the news. This AI stock is driving the whole technology sector. Social media mentions are up 268% in the last 24 hours. With volatility expectations for Friday’s expiration at such a high level, we can use a high-probability option selling strategy to make a bet that the stock will NOT continue to fall to it’s biggest decline of this year.

To get the details on today’s trade, be sure to read today’s ODDS Online Daily Option Trade Idea.