Impact of ASML's Drop on $Nvidia (NVDA)$
The short answer: ASML's decline doesn't seem to be impacting Nvidia, at least based on current options positioning.
In theory, ASML's sell-off should spark further pullback in Nvidia, but options flows suggest otherwise.
On Tuesday, both call and put openings were fairly normal - no aggressive lower strikes on the upside, nor any gapping put openings from outright bears.
Key institutional flows included:
The "Billion Dollar Man" rolling his $NVDA 20241220 125.0 CALL$ position higher
An unknown institution rolling their $NVDA 20241220 130.0 CALL$ up
Another spread trade in $NVDA 20241115 110.0 CALL$ and $NVDA 20241115 110.0 PUT$
Overall, no signs of heightened put buying.
While ASML's decline was sharp, it was likely the final washout. Management had already warned in 2023 that 2024 would mark the cycle trough, with a recovery expected in 2025 driven by High-NA EUV demand.
Moreover, semiconductor equipment group SEMI forecasts the 2024 equipment market will grow 3% year-over-year to $98.3 billion, with 2025 seeing a further 15% increase to $112.8 billion.
For those looking to buy ASML, the November 14th Investor Day event with formal guidance could represent a floor for the stock.
With this Friday's monthly option expiration, Nvidia price action should remain contained between $125-$135 this week given the open interest landscape.
Tesla options volumes have cooled substantially of late, so looking at 5-day new open interest highlights any meaningful changes.
Similar to Nvidia, normal two-way flows without any aggressive downside put buying nor lower call strikes being targeted by buyers.
While some may draw parallels to the July lows near $180, that was a broad market capitulation event rather than a premeditated single-stock bearish onslaught.
With no major earnings-event flows yet, Tesla should continue rangebound between $200-$220 for now.
$China Internet ETF - KraneShares (KWEB)$
On Tuesday, we saw a bullish call spread looking for $KWEB$ to rally above $36 but stay below $40 into year-end:
Buy $KWEB 20241220 36.0 CALL$
Sell $KWEB 20241220 40.0 CALL$
While directionally sensible, this may be too aggressive given the recent chop. For stock owners, a more defensive collar could be explored:
Stock
Buy $KWEB 20250117 28.0 PUT$
Sell $KWEB 20250117 40.0 CALL$
$20+ Year US Treasury Bond ETF - iShares (TLT)$
We also saw a 100,000 contract bullish call spread trade in bonds on Tuesday:
Buy $TLT 20241101 96.0 CALL$
Sell $TLT 20241101 99.0 CALL$
Looking at the chart, TLT appears to have found a floor. My preference would be to sell the $TLT 20241101 96.0 PUT$ for some extra yield against long positioning.
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
