This chart says a lot. NVDA generally celebrates earnings with a spike party and opens the next day higher, but…
The first box is the gap up open, most of the time yet the second box shows that it always goes down during the day from that price. And for even more color, in the middle there, it goes up from the opening price every time as well. Amazingly consistent, no?
You know what the culprit probably is…it’s the options stupid. It gets yanked higher by the open interest in calls folks are yoloing after the report and into the open, and when those are sold and vol collapses the dealers long NVDA to hedge those options then sell the underlying. Thus the pressure.
And it is also the end of the month, so there are a lot of options open, something I write about often:
EOQ/EOM The Underappreciated OPEX
Does the price action this week look vaguely familiar? Markets clenched like before OPEX, I mean, what is going on, this was supposed to be unclench week, right?
And here they are, and this open interest will probably grow as the week goes on:
So, we are pretty assured that Huang will say that demand is off the charts ridiculous of course and that it will open up and fade, and that the open to 10am is probably a good time to get long some vol for a couple key events, non-farm payrolls and this behemoth after hours the day before NFP:
I mean, let’s be real, it should be the Mag 8, in that AVGO has blown by TSLA in market cap. And, with a market cap of that size, it can move QQQ and SPX. Not only that, it has been on fire this year up over 100% from the April low with no significant retracements:
So this report should add a bit of implied vol to NFP day in my opinion, so you can probably see where I’m going with this. A bit of a NVDA vol trades redux, selling before and owning the reaction vol to these two events. Those are doing quite well, all those calendar and diagonal vol pairs are up significantly from that note already.
And, implied vol should be bid; if you recall SPX gapped lower 100pts on the last report, a total disrespect of the vol Bing. Vix 9-day closed Wednesday that week at a mere 13, and ended up hitting 23 on NFP day.
