To The Moon

On Monday June 24th, there was another large options trade in the $NVDA 20240920 105 CALL$ that the $200M trader is close - a 20,000 lot seller hit when Nvidia was $120, adding to their prior 60,000 lot reduction. This leaves them with 210,000 lots remaining. Interestingly, on the prior Friday June 21st, Jensen Huang filed to sell 120 thousand shares. Coupled with previous sales, Huang has now sold 720 thousand shares total - a near exact match for the $200M trader's 80,000 lot (800 thousand share) reduction. Prior to this, the $200M trader had only been rolling their position higher, never reducing. So the identity of who they are hedging for is now clear. Insider sales ahead of the shareholder meeting are not the best optics. Additionally on Monday, there was a massive 19,200 lot buyer of $NVDA 20240628 110 PUT$ for $9.578M in premium. Then on Tuesday, a new 8,500 lot opening buyer emerged in the $NVDA 20240802 96 PUT$ for $900thousand. So should we hedge or reduce our longs as well? My first thought was - will we get a repeat of 4/19? The type of major selloff we saw that Friday is usually reserved for monthly opcycle expirations. But with so much residual open interest from the split, maybe market makers didn't want to risk pinning. Hence the sideways drift into the close. So the onus has been pushed to this week to take out the call strikes. I was perplexed by the index action on Monday. There were sizable put buyers in $SPY 20240630 535 PUT$ , yet despite Nvidia's 6.6% drop, the indices barely budged down 2%. Apple and the Dow actually rallied to keep the three majors afloat. So who would take the lead on the pullback? Tuesday provided the answer - an elongated start/stop recovery process. The Dow led the retreat, and all three are now set up for a Friday plunge. Projecting the scope of this pullback, some healthy digestion seems warranted. Rewinding to Nvidia's 4/19 crash, there was significant preceding put derisking in the major index options. A similar lead-up is unfolding now. My base case is a two-week ~2.4% pullback in SPY to the 530 area by July 5th. For this week, a decline through 535 (1.6%). QQQ should see a similar 1.5% retreat this week to 470, and a 2.5% pullback to 465 over the next two weeks. For Nvidia specifically, last week's 120 proved too optimistic in hindsight. Friday's selloff confirms a retest of 110 is likely. So what's the play? Buy puts while they are still relatively cheap given the elevated share price. After repeatedly putting on lucrative put sales, we must flip to the buy side with hedges. Nvidia could fall to 110 on Friday My 120 put sales are now covered, awaiting cheaper entries on Friday's dip. On put strike/expiry selection - while the $NVDA 20240628 110 PUT$ bought seem cheaper, be aware of cash covering the potential assignment risk if utilizing a "do not exercise" instruction. An overnight gap down could blow through and get randomly assigned by the broker's risk desk before securing max profits. The $NVDA 20240802 96 PUT$ provide that extra downside buffer in case the selloff leaks into next week or beyond. But based on prior cycles, the current week's strikes tend to be the target (110). So 96 is likely just playing a leveraged role. I've started scaling into some $NVDA 20240705 115 PUT$ , and will look to add to the weekend expiries like the 110s on any Friday capitulation. Regarding Micron's earnings, while MU could rally, this week's tape suggests little potential for a broader Nvidia rebound.