To The Moon

TL;DR: For Nvidia's Q4, the expected trading range is roughly $90-130, with $110 as the median price point.

Following Nvidia's Q2 earnings release, the famous $200 million trader rolled their position:

• Closing $NVDA 20240920 105.0 CALL$  100,000 contracts

• Opening $NVDA 20241220 110.0 CALL$  126,000 contracts

Previously I may have conflated their position with other funds, as it's not uncommon for prominent whales to have imitators piggybacking.

Evaluating the closed 105 calls ($NVDA 20240920 105.0 CALL$ ), the trader likely took a small loss based on the chart, but nothing extraordinary for an option buyer given the volatility.

We know this fund uses options to hedge their equity holdings. Considering the turbulence since establishing their Nvidia position back on May 29th, not blowing up amid the Q2/Q3 cyclicality is actually an accomplishment.

My assessment is their strike selection at 105 was prudent given this outcome across a volatile stretch.

As for the new 110 calls ($NVDA 20241220 110.0 CALL$ ), the $5 higher strike signals a positive reaction to earnings and an expectation for further upside in Nvidia's share price.

However, the reduced contract size (126k vs 240k previously) suggests either 1) Expectations for elevated Q4 volatility around the next rate cut or 2) A lower hedge requirement if the fund has been distributing shares.

But based on history, we can roughly deduce Nvidia's Q4 trading range will be $90-130, with $110 as the median expected move - perfectly aligned with this new options positioning.

One pattern to note is Nvidia typically sees a pullback after the $200 million trader rolls their exposure.

So the cluster of 80 strike puts that traded on Friday didn't surprise me:

However, the question is - how much premium changed hands for those 80 puts? The overall trading värumes and premium spent look rather miniscule. These extremely out-of-the-money put purchases were likely just noise, "panic buyer" gambits rather than any conviction positioning.

We did have the August nonfarm payrolls release on Friday, though I don't think expectations were necessarily dour. The news over the weekend that Goldman was preparing to cut 1,300 more employees seemed like an attempt to manufacture a weak labor market narrative.

So do those 80 strike Nvidia put buyers really hold much credibility? I'd argue no - something like $100 feels like a more reasonable downside target this week barring a disastrous jobs print that could trigger a move towards $90. But I don't expect those type of panicky, low-premium put buying strikes to persist into next week.

My 110 strike put overwrite ($NVDA 20240906 110.0 PUT$ ) was closed at the open for a full profit. The 130 call overwrite ($NVDA 20240906 130.0 CALL$ ) also looks safe to expire worthless.

For other names:

$Tesla$ - 215 call / 180 put overwrite

$SPY$ - Downside put spread flows under 550, primarily 550-540 strikes

$KWEB$ - 26 strike call overwrite

$Pinduoduo (PDD)$ - Put buying focused around 95 strike, potential longer-term anchor