Wednesday’s Vital Data: Nvidia Corporation (NVDA), Micron Technology, Inc. (MU) and Tesla Inc. (TSLA)

Options activity provides a look at expectations on NVDA, MU and TSLA

By Joseph Hargett, InvestorPlace Contributor

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U.S. stock futures are mixed this morning. Overnight, North Korea signaled it would pull out of a summit with the U.S. if President Donald Trump insisted on denuclearization. The uncertainty has shaken Wall Street and looks to put an end to eight straight sessions of gains.

stock market today

Meanwhile, economic data will also be in focus today. April U.S. housing starts and the April reading on  industrial production are slated to hit the Street later this morning.

Ahead of the open, futures on the Dow Jones Industrial Average were down 0.09%. S&P 500 futures were last seen lower by 0.08% and Nasdaq-100 futures have lost 0.05%.

In options activity, volume was anemic on Tuesday. Only about 16.7 million calls and 15.7 million puts changed hands on the session. On the CBOE, the single-session equity put/call volume ratio held at 0.62. The 10-day moving average fell to 0.6, hitting it’s lowest reading since March 15.

Options traders eschewed corporate earnings reports in favor of cryptocurrency speculation on Nvidia Corporation (NASDAQ:NVDA) and Micron Technology, Inc.’s (NASDAQ:MU) recent breakout. Meanwhile, Tesla Inc (NASDAQ:TSLA) was hit with heavy put volume after Morgan Stanley cut its price target.

Let’s take a closer look:

Wednesday’s Vital Options Data: Nvidia Corporation (NVDA), Micron Technology, Inc. (MU) and Tesla Inc. (TSLA)

Nvidia Corporation (NVDA)

Projected decline from crytpocurrency miners continues to plague NVDA stock. In its recent earnings report, Nvidia said it expected to see crypto demand drop by 75% in the second quarter.

By contrast, rival Advanced Micro Devices, Inc. (NASDAQ:AMD) is on the rise despite similar crypto demand concerns. However, AMD reported that only about 10% of its revenue came from cryptocurrency miners, while Nvidia said crypto demand made up 20% of their revenue.

NVDA options traders are either taking profits amid the stock’s decline, or gearing up for a rebound. Volume yesterday rose to 254,000 contracts, or about 1.6 times NVDA’s daily average. Calls accounted for 60% of the day’s activity.

June NVDA options are pointing toward a continued decline for NVDA stock. Currently, the June put/call open interest ratio rests at a lofty perch of 1.17. Peak put OI totals 9,500 contracts at the deep out-of-the-money $220 strike, however, and could be a sign of put selling and premium capture.

Micron Technology, Inc. (MU)

It’s that time again. Time for MU stock to make another pre-earnings rally into the stratosphere. Micron shares are up nearly 12% since Monday last week, with the shares rallying hard off recent lows below $50. Adding to yesterday’s buying pressure, Stifel raised its price target to $101 from $95, making it the highest among all brokerage targets.

Stifel estimates that estimates that PC DRAM prices are up 6% quarter-over-quarter, with mobile DRAM prices up 4%. Additionally, Stifel noted that “the NAND flash market is growing and far from collapsing as the bear case has it.”

MU reports earnings near the end of next month, and options traders are already gearing up for the rally. Volume yesterday jumped to 231,000 contracts, with calls claiming 70% of the day’s take. The June put/call OI ratio rests at a bullish 0.55, with calls nearly doubling puts for the series.

However, June monthly options will likely expire ahead of earnings. The weekly June 22 series is considerably more bullish. In fact, the put/call OI ratio for this series comes in at a lowly 0.19, with calls more than five times as popular as puts.

Tesla Inc. (TSLA)

Long-time Tesla bull, Morgan Stanley analyst Adam Jonas, just cut his price target on the electric vehicle maker. Jonas lowered his target to $291 from $376, expressing concerns about Tesla’s cash flow situation. Summing up Jonas’ comments, the analyst is betting that Tesla will need to continue to raise cash, projecting that the company will need to raise $3 billion in the third quarter.

TSLA options traders were listening. Volume yesterday rose to 195,000 contracts, with puts making up 53% of the day’s take. Looking out to June, the bears are firmly in control. Specifically, the June put/call OI ratio rests at 1.76, with puts nearly doubling calls in the series.

Peak put OI totals more than 17,000 contracts at the $250 strike. A breach of $250 could lead to a serious round of selling pressure and put TSLA stock deep in bear market territory.

As of this writing, Joseph Hargett held no positions on any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2018/05/wednesdays-vital-data-nvidia-corporation-nvda-micron-technology-inc-mu-tesla-inc-tsla/.

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