Markets are surging thanks to a lift from Nvidia Corp (NASDAQ:NVDA), after CEO Jensen Huang revealed the company's latest development, the N1X superchip, also called the RTX Spark, created with Microsoft Corp (NASDAQ:MSFT). The PC processor news is giving Nvidia's chip partners a halo lift, including Dell Technologies (DELL) and HP (HPQ).
NVDA was last seen up 4.7% to trade at $221.04, adding to its 18% year-to-date lead and recouping some gains after suffering a brief late-May pullback. MSFT is up 2.4% at $461.07 at last look, pacing for a third-straight daily win and back above the $450 mark for the first time since suffering a late-January post-earnings bear gap.
Analysts have been heavily optimistic toward NVDA and MSFT, with 46 of the 49 covering the former sporting a "buy" or "strong buy" rating, while the latter carries 42 of 48 "buy" or better ratings.
Options traders have been extremely bullish toward both equities. This is per Nvidia and Microsoft stocks' respective 50-day call/put volume ratios of 2.27 and 3.23 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). These ratios rank in the 88th and 100th percentile of annual readings. Should this bullish attention begin to unwind, it could introduce headwinds to the tech leaders.
Call traders are swarming MSFT in response. So far today 778,000 contracts have been exchanged, double the average intraday rate, with the weekly 6/1 465- and 470-strike calls seeing the most attention, with opening activity detected here.
What's more, NVDA's Schaeffer's Volatility Scorecard (SVS) comes in at 22 out of 100. This suggests the equity has consistently realized lower volatility than its options have priced in -- a boon to premium sellers.
