To The Moon

On June 18th, Nvidia's ($NVDA) share price surged past $135 intraday, surpassing Microsoft and Apple to become the world's most valuable public company.

This Friday, June 21st, the quadruple witching day - have market makers gone crazy? Let me check the open interest.

Whoa, a huge one:

At noon on Monday, The big trader reduced his position in the $NVDA 20240920 105 CALL$ . Originally 105,000 contracts traded (2.9M pre-split), he closed out 600,000 of the remaining 2.3M contracts on Monday.

Two hours after The big trader's trim, another major transaction emerged:

Selling $NVDA 20240719 130 PUT$ 
Buying $NVDA 20240920 130 CALL$ 
Selling $NVDA 20240920 150 CALL$ 

That day, OI increased by:
+140,000 on the 20240719 130 PUTS
+260,000 on the 20240920 130 CALLS
+350,000 on the 20240920 150 CALLS

The strategy traded in scattered lots, preliminarily estimated at 540,000 total contracts with a Put:Call:Call ratio of 1:2:2.

The intent is clear - This institution willing to buy shares below $130 by July 19th, implying they don't expect a drop below $130. Simultaneously, they see higher probability of continued upside over the next 3 months, likely in the $130-150 range.

Relative to the current frenzy, $150 seems conservative, but unlimited upside is viable given the long 130 calls to capture further gains.

However, short-term signals suggest Nvidia may see a minor pullback. Huang's selling, The big trader's trim, plus heavy buying in the weekly 135 puts ($NVDA 20240621 135 PUT$ ).

Data shows 1.08 million new 135 put buyers on Monday, majority opening purchases.

So should we fear a dip? The $130 level from the trade above provides a reference point.

Given the 4/19 flash crash, it's prudent to closely monitor put buying over the next two days. Maybe grab some lottery puts on Friday.