To The Moon

$Tesla (TSLA)$

After seeing Tesla's new large option trades yesterday, I couldn't help but chuckle at the comedy of errors that could end up fueling a move to $370.

First, the institutional hedgers rolled their $330-$360 collar up to $365-$405, now expecting TSLA to stay below $365 while hedging the $365-$405 upside:

Sell $TSLA 20241122 365.0 CALL$ 
Buy $TSLA 20241122 405.0 CALL$ 

As I mentioned yesterday, the logical short strike for a pullback in week 2 should have been the prior $360 highs, not the $330 level from Friday's highs which was excessive.

But with Monday's open above $340, they seemingly lacked conviction in getting back below $330 this week, so they rushed to re-adjust higher.

Buying the $405 calls to cap upside was prudent, contrasting sharply with the self-implosion below.

The second major trade was actually two likely related transactions:

Sell to Open $TSLA 20241213 360.0 CALL$  18,900 contracts
Sell to Open $TSLA 20241213 370.0 CALL$  40,000 contracts

This trader sold the December 13th $360 and $370 calls for a colossal 18,900 and 40,000 lot respectively.

The concept here is they will face volatile risk exposure if TSLA touches $360 by Dec 13th, requiring margin/deleveraging. And if it rallies just 2.7% higher to $370, they've essentially planted a bomb underneath their position to fuel the move higher.

It ties back to the familiar high/low probability narrative - if TSLA stays subdued into Dec 13th expiry, they'll harvest premium selling these calls. But any sudden upside rip to re-test highs could self-immolate this position as fuel for a squeeze.

This chaotic approach is giving me PTSD flashbacks to the guy who sold the $300 calls a few weeks ago and got run over. Is that you bro? If so, thanks in advance for your contributions.

$Nvidia (NVDA)$

On Monday we saw a third wave of distinct earnings flows, perhaps positioned more speculatively for volatility after NVDA's pullback.

The first trader did a $155 call debit spread, funding the long calls by selling $130 puts:

Sell to Open $NVDA 20241206 130.0 PUT$  5,000 contracts
Buy to Open $NVDA 20241206 155.0 CALL$  5,000 contracts

This is elegant - the put sales roughly offset the debit paid for the $155 calls. Max gain if NVDA rallies past $155, no loss between $130 and $155, and defined risk below $130.

The second trader played a longer-dated $155/$175 call spread, also selling puts to defray the upside call costs:

Sell to Open $NVDA 20250321 120.0 PUT$ 
Buy to Open $NVDA 20250321 155.0 CALL$ 
Sell to Open $NVDA 20250321 175.0 CALL$ 

More robust than the first trade, though I may have chosen a nearer-dated short $175 call.

The third trader bought a strangle for a volatility play, seemingly more bearish expecting NVDA between $125-$135 post-earnings:

Sell to Open $NVDA 20241122 125.0 PUT$ 
Buy to Open $NVDA 20241122 135.0 PUT$ 
Buy to Open $NVDA 20241122 155.0 CALL$ 

All this week's expiries, suggesting the $155 calls were mainly for a volatility hedge rather than betting on a big rally.

The fourth trader seems bullish above $150 but protected against a catastrophic decline:

Sell to Open $NVDA 20241122 105.0 PUT$ 
Buy to Open $NVDA 20241122 125.0 PUT$ 
Buy to Open $NVDA 20241220 150.0 CALL$ 
Sell to Open $NVDA 20250117 180.0 CALL$ 

Again mixing weekly put sales with slightly longer-dated upside exposure, cautiously bullish while guarding against a disaster scenario.

The fifth trader just bought $76 puts expiring this week, likely a retail volatility speculation:

Buy to Open $NVDA 20241122 76.0 PUT$  21,000 contracts

They paid $2M premium buying these puts at the lows around 9:50am, probably down big already. The market maker selling them these lottery tickets is laughing.

The sixth trader did the opposite, selling volatility by shorting some $110 puts:

Sell to Open $NVDA 20241220 110.0 PUT$ 

In contrast to the $76 put buyer above, this trader shorted $110 puts on the dip, a relatively safe earnings strangle to sell.

My Position:
After observing for 3 days, the market seems fairly cautious on NVDA earnings expectations. The key levels in focus are whether it can break $150 (with $160 seemingly the upside cap) or if it crashes below $125.

So my trade is: Stock + Sell Put $NVDA 20241122 120.0 PUT$  + Sell Call $NVDA 20241122 160.0 CALL$