To The Moon

$NVIDIA Corp(NVDA)$ failed to withstand the squeeze pressure and plunged towards $800. The overall market had a significant number of options expiring on April 19th, with a heavy tilt towards puts, creating a resonance effect. As my friend said, it seems like we have an "option expiration day" every month now.

Despite our thorough analysis this week, our optimism was a bit excessive. However, the silver lining is that after experiencing this minor squeeze, we'll be more cautious when we encounter similar option expiration setups in the future.

Although NVIDIA's stock price took a substantial hit, there's some good news. After this Friday, the massive number of put options expiring on April 19th will be cleared, leading to a cliff-like decrease in NVIDIA's outstanding put option volume. Currently, the largest outstanding put option for next week is the $NVDA 20240426 800.0 PUT$  with just over 5,000 contracts. Looking at the overall picture, the highest outstanding put option is the $NVDA 20240517 800.0 PUT$  expiring on May 17th, with over 10,000 contracts.

Here's an interesting question: Why didn't anyone buy put options expiring next week (April 26th) during NVIDIA's steep decline on Wednesday and Thursday?

From my observations, the put options with the highest trading volume on those two days were still the ones expiring this week (April 19th). Apart from the cheaper pricing, the market was also closely watching whether NVIDIA would breach the $850 level. If NVIDIA manages to close above $850 on April 19th, there would be no need to purchase put options with later expiration dates.

Considering that institutions also need time to discuss and analyze, they'll likely complete their option positioning on Monday, at which point we can analyze the situation further.

The broader market issue with the S&P 500 ETF (SPY) is more concerning. Despite decent earnings reports from TSMC and Netflix, their stock prices declined, suggesting the market views current valuations as somewhat expensive, and other earnings reports may face similar challenges. With the S&P 500 down 5% in April, sideways consolidation is more likely in the following month. Consequently, I've noticed the emergence of selling at-the-money call options on the SPY. Correspondingly, some heavyweight stocks also have significant bearish bets, such as the $AAPL 20240920 150.0 PUT$  and the $MSFT 20240920 405.0 PUT$ .

Additionally, there are no significant positions being established in $TSMC (TSM) at the moment, possibly to avoid contributing to volatility on Friday.