Market Insights

Options traders flocked to Nvidia yesterday ahead of a potentially key week for the AI giant.

Volume surged in short-dated weekly calls expiring this Friday, which suggests investors are looking for a quick move. Here were some of the busiest contracts:

• More than 260,000 10-January 155 calls changed hands against open interest of 26,601 contracts. Premiums started the session around $1 and jumped as high as $2.35 as the stock advanced.
• Almost 230,00 10-January 150 calls traded for $2.44 to $4.66, shooting past open interest of 70,786.
• Volume in the 10-January 152.50 calls also jumped past 215,000, dwarfing open interest of 63,792. Premiums climbed from $1.31 to $3.40.

Such activity, with turnover well above open interest, indicates that new positions were initiated. The focus on this week’s expiration (41 percent of total volume) may suggest that traders expect a breakout in the short term.

Calls fix the price where a security can be purchased. They can appreciate rapidly when values increase, but become worthless if shares don’t reach a certain level by expiration.

All told, NVDA traded about 4.2 million option contracts yesterday. That made it the second-busiest underlier in the entire market, with calls accounting for almost three-quarters of its total volume.

News events and technicals may explain the bullish sentiment. NVDA CEO Jensen Huang was scheduled to speak at the CES 2025 (consumer electronics show) last night, and more information is expected at 3:30 p.m. ET today when executives hold a Q&A with analysts. That could be especially important with production ramping in the company’s key Blackwell chip. There could also be talk of new graphics and robotics, according to Dan Ives of Wedbush Securities. He added AI could enjoy broader adoption and get more common with ordinary consumers.

Nvidia (NVDA), daily chart, with key patterns and indicators.

Nvidia Price Chart

The stock chart may hold other clues because NVDA started the week by climbing 3.4 percent to $149.43, its highest closing price ever. The shares have been in a relatively narrow range for the last two months,  depressing Bollinger Bandwidth to the bottom of its recent range. The stock is also near its peaks from July. Could that period of sideways movement give way to a new trending phase?

Traders recognize similarities from a year ago. In January 2024, for example, NVDA squeezed near its peak from the previous summer before breaking out and running almost 100 percent over the next two months. That rally also came after moving average convergence/divergence (MACD) started rising — another sign of potentially bullish momentum.

The 100-day moving average and weekly candles may present other similarities: NVDA started last year by making a higher weekly low above its 100-day MA before breaking out. As the chart above shows, the same thing may have just taken place.

Technical analysts may also notice that prices bottomed in December at their closing high from August 23. Old resistance becoming new support is potentially consistent with an uptrend.

In conclusion, active traders often seek moves based on catalysts and patterns. After doubling the last two years, NVDA may be experiencing more catalysts and similar patterns.