To The Moon

Well, they don't call the U.S. the "Nation of Debt" for nothing. Not only are Americans leveraged with loans, but the stock market itself trades on borrowed expectations, with price action always frontrunning eventual outcomes.

The August nonfarm payrolls data came in weaker than forecast at 142k vs 160k expected. The July figures were also revised sharply lower to just 89k from 162k. The unemployment rate fell to a new 6-month low of 4.2%.

After the release, rate trader tools showed a tug-of-war in pricing, but net-net it's still about a 55% chance of just a 25bps hike rather than 50bps at this point. Though we did have that August 5th "black swan" experience fresh in memory - it seemingly would take a Japanese market crash to get the Fed to 50bps now.

But some near-term consolidation in equities isn't necessarily a bad thing. What if subsequent data shows the economy isn't as weak as portrayed? If Powell only delivers 25bps, that rally window would still be open.

$Nvidia (NVDA)$

On Thursday we saw a large institutional "short straddle" position initiated:

Selling $NVDA 20241018 107.0 CALL$ 
Selling $NVDA 20241018 107.0 PUT$ 

The distinction between straddles and strangles is that straddles use the same strike for calls and puts, whereas strangles use different strikes.

Colloquially I tend to use these terms interchangeably since the word "straddle" can encompass both variations.

Anyway, no issues with this short 107 straddle, it aligns with our expected $90-130 trading range for Nvidia over that timeframe.

The breakevens on this short straddle are theoretically 107 +/- the total premium taken in, so roughly $92-122 by October 18th expiration to make money.

For Nvidia's single-leg flows, one standout open interest catch lies ahead of the previous highs:

Selling $NVDA 20240920 136.0 CALL$ 

Clearly not expecting new highs in the next two weeks before the September 20th expiration.

As for more relevant strike levels on the downside into that 9/13 weekly expiration, the most active open interest strikes provide some guidance:

The top 4 open interest levels are relatively clustered, so the key downside strikes become more meaningful. Based on 9/20 open interest, a retest towards $90 looks quite probable within these next two weeks.

Breaching $80 doesn't appear likely until October though, as the market will soon need to position for Q3 earnings after the 9/20 FOMC meeting. Any severe misses and resulting breakdowns would be an October event.

So the $90-118 range seems reasonable for Nvidia next week. $118 was that covered call roll from institutions on Tuesday, and aligns with the $NVDA 20240913 118.0 CALL$  / $NVDA 20240913 90.0 PUT$  strikes I'm looking at as well.

Though if we did happen to breach $90, I'm not too concerned having previously established some long-dated put exposure.

$Tesla (TSLA)$

A 5% pullback for Tesla on the heels of payrolls, though prudent to not have any major positioning into that event. But institutions did get caught offside with elevated call overwriting:

Rolling to $TSLA 20240913 242.5 CALL$  on Thursday at lower strikes after the selloff.

Tesla has shown more relative strength compared to Nvidia though, so worth monitoring any further dips as potential entry points next week.

Cryptocurrencies remained under pressure, with $MSTR$'s institutional covered call also rolling much lower:

Rolling to $MSTR 20240913 132.0 CALL$ 

Overall, the bottoming process may continue playing out in the near-term until oversold conditions present themselves for a countertrend rally across risk assets.