One Of Nvidia's Biggest Bears Has Changed His Mind

NVIDIA Corporation NVDA earns the titled as one of 2016's hottest stocks and is up another 48 percent since the start of 2017. But quietly behind the scenes the options market is now heating up, according to Dennis Davitt of Harvest Volatility Management. Nvidia is a stock that is "made for options," Davitt explained during a recent CNBC "Trading Nation" segment. Specifically, buying options in the high-flying stock gives investors exposure to future gains without having to buy the stock which trades above $150 per share. While this can be true for every stock, there is some unique activity occurring in Nvidia: The demand for upside calls greatly exceeds demand for downside put options.

Technical Levels To Watch

Ari Wald, Oppenheimer's technical strategist, offered his take from the stock's perspective. Looking at the 20-day moving average, key technical levels investors should be aware of is $142 and $168. Related Links: Despite Sustainability Concerns, Analyst Getting Positive On Nvidia And AMD Fundamentals Goldman Lifts Earnings Estimates For Nvidia Due To Nintendo Switch Demand

"That means if you are in this stock you can sell a call that is $30 out of the money to buy a put which is $20 out of the money," he explained. "So, you get paid in essence to insure your position and that's just because there is so many people playing options in Nvidia right now."

$142 per share represents the stock's lowest level in June and so long as the stock doesn't dip below the support level the near-term direction of the stock remains to the upside, he explained.

Also, $168 represents Nvidia's all-time high level but the stock has faced selling pressure near this level. If shares move about the $168 level this may indicate a longer-term upward trend is resuming.