What does it mean that NVDA ITM call closed?
I’m trading on $NVIDIA Corp(NVDA)$ earnings with options, cause NVDA is the leader in AI, and AI is leading the whole stock market.
On the post-earning day, NVIDIA fell by 2.4%, while the $Invesco QQQ Trust-ETF(QQQ)$ stubbornly increased 0.41%.
But on the other hand, we can also think that the market originally expected NVDA's financial report to rise by more than 10 points (as mentioned in previous articles), which would lead to a further rise in the overall market. However, if NVDA's performance exceeds expectations but does not rise, there is no reason to support a big rise in the market, which makes QQQ even colder at a higher level.
So, how did the price of NVDA go on the first day? We can still find clues from the unusual options.
A large number of in-the-money calls that expire this week were closed out, mainly concentrated between 470-490, which is exactly the area with the largest decline yesterday. This is mainly due to speculative net long positions recovering residual value, and there are also some new positions opened, but there are hedging orders that expect NVDA's price to fall.
A large number of open calls fell to around $490-500. In fact, I am thinking that if they are not closed out at this level, I don’t even think this week will close above $500. This is completely opposite to the situation before the financial report when a large number of open calls were concentrated at $550. At the same time, the proportion of open puts has increased, especially for end-of-day puts between $460-495, which means that investors are still betting on a further decline this week.
In summary, through abnormal options, the market's price expectations for NVDA this week have dropped from around $550 before the financial report to around $475.
Someone may ask why I pay so much attention to options.
Because derivatives are one of the most important tools for discovering underlying asset prices. With the popularization of quantitative trading, more and more investors will use options to hedge risks and enhance returns. Therefore, the earlier you get into it, the more benefits you will get!
Happy Trading!
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Excellent analyse of the price of NVDA, you not only showed a clear graph but also presented a clear logical link. Although the market’s price expectations for NVDA dropped recently, I think it might have some positive changes in the future.