BY ANDREW GIOVINAZZI
August 27, 2024
Yo Pit Crazies,
Time decay is real, even when it stops for a while. Check out how to trade it here.
Labor Day is Monday September 2nd. That is our last chance at summer BBQ and a day off in the sun. We won’t see another holiday until Thanksgiving except the bank holidays for traders. Traders know the long weekend is coming and priced accordingly.
Below traders have priced the Sep03 contract for the holiday. Readers of this newsletter know that time comes out of options by reducing volatility over the period of time. The Sep03 term are the cheapest options of the bunch.
On the other hand, Aug29 and 30 are not. They are relatively very high and priced in the 17 to 15.86 range. Each term is a small story in how the market is pricing options for events.
I wonder what the event is?
NVDA earnings is the known summer event, the Carry Bomb was the surprise
We covered Nvidia Corp (Ticker: NVDA) yesterday in the Ticker Highlight Show. NVDA option prices are through the roof and this is the most expensive option cycle relative in a long time. Most of the Great 8 have had disappointing earnings this cycle. It is not that the earnings were not good as in the companies where very profitable, they just were not AI perfect.
The usual option implied move is 7.62%. Right now it is over 10%.
It feels like the market is pricing a miss here or even very good earnings will not be good enough. The NVDA earnings event is holding up volatility in the broad market and the VIX in general. I expect chop for the week so opportunities will be in other names until NVDA earnings come out then we might see some broader market action again.
In the Trading Desk we use Weekly Trades centered around equities. There is not always index or VIX action so having equities to trade rounds out the opportunity. Check it out.
To Your Trading Success,
Andrew Giovinazzi
30-Year Trading Pro
See what's hot at option pit
CAPITOL GAINS: SMR Aug16 7 call closed for a 150% gain
DELTA STRIKE: VLY Mar15 8 puts closed for a 88% gain
PFE May17 26 calls closed for a 66% win
OP MENTORING: SPY Mar22/19 510 put calendars and 520 calls for 6.4% gain
OPTION SHOPPER: ERX Mar28 65 calls closed for a 90% gain
The VIX future pop was good old supply and demand. Is the VIX call buyer right? Time will tell but my Weekly Profit Cycles strategy does not care because I am always holding market downside protections via VIX calls or SPY puts.
If this market gives you the jitters, take a look at what non-correlated market returns can do for your portfolio.
To Your Trading Success,