To The Moon

TL;DR: Expected trading range for $Nvidia (NVDA)$ next week is $100-126.

$NVIDIA Corp(NVDA)$ gapped lower and sold off on Friday following Thursday's earnings report, closing at $117.59. Our familiar institutional overwriters and the infamous $200 million trader were both active on the name.

First, the standard weekly covered call roll from institutions. After getting blown out on their 111 calls a couple weeks ago, they reasserted control by rolling their overwrite down to $NVDA 20240906 126.0 CALL$  after Nvidia failed to breach 130 following results.

So the pre-earnings closing high around 126 now becomes next week's key resistance level.

It's not just Nvidia facing this overhead supply either - $Tesla (TSLA)$ and $Coinbase (COIN)$ also saw lower strike call overwrites for next week at 215 and 207.5 respectively, as I noted yesterday.

As I've mentioned before, aggressively low call strikes like these are an institutionally bearish signal. The market simply got ahead of itself on this bounce, and these overwriters are reining things back in.

There was another institutional roll in Nvidia to the $NVDA 20240906 127.0 CALL$  as well.

Meanwhile, the infamous $200 million trader was a large 50,000 contract seller of their $NVDA 20240920 105.0 CALL$  position.

This was not a roll but an outright sale. After including prior selling, they likely have only around 50,000 calls remaining from their original 290,000 contract position established back in mid-June.

Between the institutional overwriters and the $200 million trader's actions, it's clear Nvidia faces significant overhead resistance in the week ahead. Further downside to test support levels seems inevitable, making this dip an ideal opportunity for call overwriting strategies.

Determining next week's floor for Nvidia is a bit trickier. By put option volumes, the most active strike is the 110 put with around 24,000 contracts trading.

However, the 100 strike put also saw over 21,000 contracts traded. Given Nvidia's immense liquidity, those put volumes alone don't necessarily constitute a formidable defensive line in the event of a sustained selloff.

Looking at open interest for the September 20th monthly put options, a dip down towards 100 can't be ruled out next week.

As I discussed in my Jackson Hole recap, employment trends are being closely scrutinized by the Fed at the moment. So the market will be hyper-sensitive to adjusting pricing around next Friday's nonfarm payrolls report. Excessively weak labor data likely triggers a plunge towards the 100 or even 97 strike. Whereas a solid report could see support form at 110 or higher.

Single-leg positioning seems to favor testing down towards 100 as well. For example, on Thursday's open there was a 7,000 contract buyer of the $NVDA 20241018 97.0 PUT$  - with the October 18th expiration and 97 strike. Note this may show up as a "call" on some platforms due to negative premium, but the trade velocity favored buying of that long 97 put strike.

There was also a seller of the $NVDA 20241004 100.0 PUT$  who could be overwriting shares with that strike for the October 4th cycle.

My plan for next week remains: Hold longer-dated protective put positions + shares, while tactically overwriting with:

sell $NVDA 20240906 130.0 CALL$ 
sell $NVDA 20240906 110.0 PUT$  (will likely roll strike down to 100 or lower by Monday)

Similar spread overwrite for $Tesla$ as well with:
sell $TSLA 20240906 215.0 CALL$ 
sell $TSLA 20240906 180.0 PUT$ 

As for index positioning, $SPY$ flows seem concentrated below 550 for next week. For example:
sell $SPY 20240906 545.0 PUT$ 
buy $SPY 20240906 535.0 PUT$ 

Same with QQQ：

sell $QQQ 20240906 460.0 PUT$ 
buy $QQQ 20240906 455.0 PUT$