To The Moon

Case closed friends, Wall Street's old guard is just too patriotic to let the markets fall around Independence Day.

Looking back at the S&P 500's price action in July, I noticed every major selloff was clustered in mid or late June, perfectly avoiding the early July 4th period. Any declines in July were just routine pullbacks within broader uptrends - leaving patriotism as the only plausible explanation.

This latest June bloodletting also solely targeted chip stocks, especially Nvidia. How can a trend of opening high and selling off not qualify as a pullback?

Whether July sees further downside remains to be seen ahead of earnings season. If no pre-earnings pullback, we'll likely get the nausea-inducing post-earnings sell-off again, just like last quarter.

Yesterday's SPY put buying reflects this view: Buy $SPY 20240731 535 PUT$ , Sell $SPY 20240731 510 PUT$ 

That said, I still plan to take it week-by-week based on my own analysis rather than blindly positioning for downside.

$NVIDIA Corp(NVDA)$

Based on the past two days of option positioning and recent price action, Nvidia has entered a more complex gameplaying phase.

There is no longer a unanimous upside bias, with traders collectively awaiting a pullback. The expected range until September is 100-130.

The actual range may be tighter at 110-125, reminiscent of Tesla's chop in the first half of this year.

First, there was a clear divergence in positioning this week. One camp was buying upside 124-131 calls, while another was heavily buying 115-110 puts - large volumes on both sides.

So we're back to the old high probability vs low probability outcomes. If Nvidia opens rangebound at 120-125 on Friday, both camps get chopped.

But any decisive break could spark a gamma squeeze.

For this week, I'll keep it fluid and reassess any opportunities after Friday's open.

The longer-term overhead resistance is massive. We saw a 10,000 lot seller of the $NVDA 20240920 125 CALL$  yesterday at the 125 strike - talk about an abstract strike/month selection. Digging into the details, it even seems to have been an outright naked call sale which is even more bizarre.

As I've mentioned before, selling at-the-money calls is an extremely bearish view. While I don't expect Nvidia to still be below 125 by September 20th, a pullback is inevitable.

But by choosing to sell calls over buying puts, the trader seems unsure on timing and would rather not burn theta decay - preferring to sell premium instead. So along those lines, I won't pre-position in puts either and will continue selling weekly call spreads, letting the pullback come as it may.

$Tesla Motors(TSLA)$

That's right, the market focus has shifted to the even stronger uptrend in Tesla!

I was quite disheartened to see it rally to 220 as early as Tuesday, rendering my 220 call spread worthless.

So I opened a 220 at-the-money put sale at the open on Tuesday: $TSLA 20240705 220 PUT$ 

Though as I write this, Tesla has already pushed up to 225, making me ponder just closing that 220 put sale and selling 225 puts instead...

The Tesla options market was hopping yesterday. First, the 200 and 220 call market makers from last week took flight, frantically closing out their hefty opening positions from last week on Monday once the trend looked unfavorable.

Then we saw a massive 16,900 lot opening buy in the far-dated $TSLA 20241115 265 CALL$ .

Put interest has elevated to the 200 strike as well.

The expected August range is now 220-240, falling within the previous 220-260 call spread range.

$SPDR S&P Retail ETF(XRT)$
One nugget is that during the 2021 GameStop frenzy, GME options became too richly priced, so institutions turned to using XRT options which contains GME to position around that theme.

So I took a look at XRT's holdings today and wow, their managers are quite nimble with the rebalancing. They've been adding to their winners - perfect way to spot which retail stocks have been outperforming by just eyeballing the top holdings.

This was the holding as of June 5th, when the ape frenzies were raging - GME was the top 2.18% position.

Fast forward to the July 1st holdings, and CHWY at 1.68% has taken the #2 spot after their 6.6% stake disclosure, while GME at 1.16% has fallen out of the top 10.