NVDA and End of Month OPEX

A clear pattern has emerged

Well the moment of truth has arrived, and once again the seemingly easiest trade on the planet was to get long NVDA calls in April and ride that to this point. Because, once again, NVDA is loaded to the gills with calls for this week and through June:

You can see that clearly there are far more calls than puts for every strike, until you get to $115. And we have end of the month gamma to discuss as well, since a slew of popular tech stocks like TSLA have large open interest for Friday. This is a topic I discuss frequently:

But with NVDA, February was a wake up call (pun intended) for those long earnings vol. The sheer weight of these helped NVDA to spike a bit after hours, but the minute the cash market opened on Thursday the 27th, it just tanked, first in the morning and again in the afternoon. Dealers were sellers as the vol evaporated, and traders sold calls, whether to overwrite or take profits. Calls being sold means dealers off the hook and selling the underlying:

Is it ironic that we currently sit at $135, exactly the scene of the crime from the February earnings release? Now, I highly doubt we retrace this February move, primarily because NVDA ‘investors’ are expecting this seasonal pattern again, so any dip will probably, at least initially be shallower over the next few days:

Yes, I omitted 2022 from the chart, because in everyone’s mind that was a Jay induced one-off situation and the pattern is clearly this chart above. For NVDA, this time into July is supposed to be easy street. And, this is precisely how the herd that is quite long giga tech now expects things to occur across that cohort; QQQ almost never fails into July:

Just getting to the average return and QQQ is looking at $600, which make you sort of appreciate how much giga tech has dominated the investing landscape for eons now. Why own SPX when you can own QQQ/choose your QQQ favorites?

And that is PRECISELY what the herd just did; the fund manager survey showed how they simply just grabbed this tech seasonality right after the magical only 30% tariffs on China weekend non-deal, they did not increase their other equities exposure:

And you know that in concert with this that folks are long a lot of calls, owning June and July upside.

But back to NVDA, the most correlated stocks to NVDA have had quite the run:

And if something bad were to occur, there would be a lot of damage done to these stocks as well. So, I offer you a list of the most damaged stocks on NVDA reaction day in February, in case you wanted to scan for cheap vol/hedges, and I highlighted those from the above chart:

All of this reaction vol is complicated by the end of the month open interest, and a clear pattern has occurred the last few months. Let’s look at SPX at the end of April: