To The Moon

In my previous article analyzing Nvidia (NVDA), I calculated the $2 billion trader's breakeven point to be around $1,120. So what would happen if the stock price surpassed $1,120?

On Tuesday at 12:41 pm, Nvidia's stock price rallied to $1,131.09. At this point, a large block trade occurred with 7,700 contracts of the $NVDA 20240920 950.0 CALL$  being sold to close the position.

It's widely known that the $2 billion trader bought 37,700 contracts this past Friday. With the open interest now reduced to 32,300 contracts, we can deduce that this 7,700 contract trade was the $2 billion trader taking profits.

Calculating with the $165.70 entry cost, the 7,700 call options were purchased for $128 million on Friday. Closing at $234.70 generated $181 million in proceeds, netting a $53 million profit in just two days.

However, reducing the position size doesn't necessarily signal any concerns. Taking profits at the target price is a normal operation, especially since this was just a partial exit.

It's also noteworthy that three minutes after the $2 billion trader closed out those 7,700 contracts, there was a large 782,700 share trade printed on the tape, a very visible block.

The Squeeze Detour

Last Friday, May 24th, there was actually a temporary squeeze that caught market makers off-guard, leading to the runaway rally into the close.

The $1,050 strike saw 107,400 contracts traded versus only 14,000 contracts in open interest on Thursday. The $1,060 strike had 78,100 contracts traded against just 6,496 contracts in open interest the prior day. Clearly, there was significant new opening buying happening on Friday to meet over 10x the prior day's open interest.

Around 2pm during the risk checks, the stock breached through $1,050, triggering additional margin requirements on the previous two failed upside breakdown attempts.

So for Tuesday's move higher, I'm inclined to view it as just a short-term upside spike.

Expectations for This Week

On Friday May 24th, there was an unconventional large opening put seller in the SOXL ETF, selling the $SOXL 20240531 52.0 PUT$  , suggesting high expectations for consolidation in semiconductor stocks this week.

Based on Friday's closing open interest levels, $1,100 should be a reasonable area to expect this week's trading range to cap out. Breaking through $1,150 seems unlikely. Selling $1,050 puts for a credit or selling $1,200 calls could offer a relatively low-risk way to position.