How Much More Can Nvidia Stock Rally After Recent Surge? Options Market Offers Vital Clues

It is a well-known fact that institutional investors, with their sophisticated tools and technology, most often manage to capitalize on a sustained stock rally. However, the question regarding how much steam is left in an already rallying stock is something that puzzles retail investors.

One such dilemma would be NVIDIA Corporation's NVDA stock movement. Shares of the chip-maker closed 24.37% higher on Thursday after the company reported its quarterly earnings and provided an upbeat forecast that beat Street estimates. So much has been the ensuing enthusiasm that Wall Street went gaga over AI-related stocks and managed to push up the Nasdaq Composite and the S&P 500 from a debt ceiling-induced decline.

Also Read: How To Buy NVIDIA (NVDA) Stock

In order to get better clarity about the near-term prospects of Nvidia stock, here's a look at what the options market is pricing in:

1. Resistance: Nvidia shares closed at $379.80 on Thursday. Options expiring on June 16 show decent open interest build-up at the $400 Call strike, indicating the level may provide some resistance in the near term. Traders might also be considering the fact that the stock has rallied over 40% in just one month, according to Benzinga Pro.

2. Support: Something strange might be happening as far as the support levels are concerned. Options expiring on June 16 indicate relatively higher open interest accumulation at Put strikes between $275 and $300 — levels that are over 20% below the stock's current closing price. Although the numbers aren't significant enough to decisively determine a possible support, the pattern could be representing a lack of conviction among traders as to how much short-term correction could the stock undergo following its massive rally in a short time. Better clarity may emerge once open interest numbers improve going ahead.

Open interest numbers only provide a fair idea about support and resistance. Any major news break or macro event may lead to significant movement in stock prices and a subsequent shift in open interest numbers.

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