Still Grinding: Day Three of the Plunge

On Friday, the triple witching day, VIX maintained high levels at market open.

Tesla dropped by 6% in pre-market trading, making many eager for a bottom to start buying. However, lower-than-expected PCE data helped stabilize market sentiment. Despite being triple witching day, put option activity suggests bears aren't making big bets. Wednesday's steep decline likely won't repeat; focus should be on next week.

$SPDR S&P 500 ETF Trust(SPY)$

SPY saw many long-dated sell calls opened Thursday, with 2026 expiration strikes above 750, which isn't particularly relevant for current trading decisions.

The most notable put option activity shows a clear range, with the top two positions being part of a large order suggesting SPY may gradually approach 577 next week, buying 585 puts and selling 577 puts:

Buy $SPY 20241227 585.0 PUT$  - 26,200 contracts opened
Sell $SPY 20241227 577.0 PUT$  - 25,400 contracts opened

This aligns with volatility expectations, though further adjustments next week are possible.

$NVIDIA(NVDA)$

While NVIDIA looked scary in pre-market, today shouldn't be too problematic. Institutions appear to be planning something for next week, with worst-case scenarios pointing to 110.

Though a Christmas week plunge seems harsh, the options positioning suggests this is the intended plan.

Some might wonder why I'm not highlighting the 80 and 75 puts. A drop to 80 is virtually impossible, so these strike prices aren't particularly meaningful - these trades are betting on volatility, anticipating a sharp implied volatility spike from a sudden drop next week.

Current position: Holding shares + sell call $NVDA 20241227 140.0 CALL$  + buy put $NVDA 20250117 128.0 PUT$ 

$Tesla Motors(TSLA)$

Unlike NVIDIA's specific downside targets, Tesla's put option positioning suggests more of a floor perspective - for instance, indicating it won't drop below 250 next week.

The largest open interest for December 27 puts is at 400. Regardless of whether the stock breaks through, it will continue moving towards 400 next week. That's why I bought January 400 puts $TSLA 20250117 400.0 PUT$  and sold 250 puts $TSLA 20250117 250.0 PUT$  to hedge time decay.