To The Moon

Last week's unusual option activity suggests July-August could be turbulent. After all, we've been anticipating this pullback since late May – the "wolf" cries have persisted for over a month. Wall Street's bears have patiently waited through the holiday period, so a correction would only be courteous at this point.

While I previously projected SPY towards 550, now that we're here, it doesn't signal an end, but rather the start of the second pullback phase.

The second phase target, based on option positioning, appears to be 520-525, implying a 4-5% further drawdown for the S&P 500.

Typical buy-side flows include: $SPY 20240816 522.0 PUT$ 

For this week specifically, there's a chance we test 540 first.

$Invesco QQQ(QQQ)$ option positioning is quite interesting, with specific strategies deployed to capture this pullback window:

Buy $QQQ 20240920 455.0 PUT$ 
Sell $QQQ 20240920 460.0 PUT$ 
Sell $QQQ 20240920 500.0 CALL$ 
Buy $QQQ 20240920 505.0 CALL$ 

A defined iron condor, allowing fluctuations within a +/- 4% range.

$NVIDIA Corp(NVDA)$

Nvidia seems to be pricing in the most severe pullback, with heavy 100 strike put buying last week. A few ways to position:

1. Extend duration to ride out near-term chop

2. Protective hedges against a breach

3. Low-risk defined-risk strategies like short strangles

Option 1 involves pushing out expirations to September and beyond, exemplified by Friday's large trade:

Sell $NVDA 20241018 145.0 CALL$ 
Sell $NVDA 20241018 110.0 PUT$ 
Buy $NVDA 20241018 90.0 PUT$ 

This structure bought downside put protection, but no matching upside call protection. If trading personally, adding a call wing makes sense. The lack of call protection from institutional flows signals a very bearish near-term outlook with crash risk.

Option 3 is simply selling out-of-the-money calls or puts above 150 or below 100 as premium collection strategies.

I've chosen Option 2 - a protective collar on my stock position by selling calls and buying puts. While a 419-esque crash needs to be defended against, is it possible this is yet another "wolf" cry?

Based on current positioning, NVDA is likely to test the 110 area. My Friday close target is 110-120.

Most are likely braced for a dip to 110, but a breach below needs to be guarded against. Hence, I bought the 105 puts last week for downside protection, financed by selling the 130 calls.

$Tesla Motors(TSLA)$

From the above, one thing is clear - if we get a 3%+ pullback in the major indexes, TSLA cannot avoid participating.

First order of business at the open was closing last Friday's put sale and rotating to Buy $TSLA 20240726 220.0 PUT$  .

Institutions continued hedging on Friday by selling $TSLA 20240726 265.0 CALL$  , aligned with my 275 call sale last week.

This flow suggests any TSLA upside following earnings will be capped at 265, with no new highs.

The bigger question is the downside - as shown, current weekly put strikes are substantially lower than the call strikes, signaling a lack of consensus on a floor. With earnings on Wednesday, we'll have to reassess positioning tomorrow.

$Apple(AAPL)$

Similar to above, closing out the AAPL put sale and rotating to Buy AAPL 20240726 210 Puts.