Nvidia May Not Be Enough To Turn The Market's Tide

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2/21/24

#Stocks – $NVDA

#Macro – $SPX,

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The S&P 500 was lower most of the day but caught a miracle bid into the close as implied volatility melted, perhaps as investors got cold feet heading into Nvidia’s results. In the meantime, Nvidia reported results; they were good, but I don’t know if they justified the rally we have seen since the beginning of the year. Revenue came in at $22.1 billion, 8.2% better than expected, while data center came in at $18.4 billion, about 7% better than estimates. Meanwhile, guidance came in at $24 billion for the fiscal first quarter, better than estimates for $21.9 billion.

So, at least after hours, the stock is trading up just under 8% to about $725, which was pretty much where it was trading on Friday when I last updated, and the market was implying an 11% post-earnings move. The only difference between now and the last time we touched base was that the stock was at $725. Today, the stock closed at just below $675, and now the stock is trading back to $725ish.

But the problem, for the most part, is that big gamma at $750 has not shifted, and so the call values at $750 are going to be losing value, and for the most part, most everything between $720 and higher in terms of calls will lose value as well. Because a $720 call was trading at $15.35 at the end of trading on Wednesday, which gives it the breakeven price of $735.35, and with the stock trading for $725 as of this writing, the premium on those calls will be down tomorrow.

It is probably not by chance that the stock got as high as $744 in the after-hours, and to this point, the stock has held there and traced lower. So, pretty much nothing has changed from the perspective over the weekend. Expect that because the stock declined heading into results, put options gained some value, and perhaps new bearish bets were placed, and those put options burnt up after hours, which allowed the stock to rally back to the upper end of the range.

If the stock can’t get over $750 tomorrow during regular trading, I think it will be in trouble because of the higher-level calls that will decay. If it can meaningfully clear $750, it probably can run to the next gamma level at $800.

My guess is, is that $750 holds.

-Mike

Michael Kramer publishes independent macro and options research read across 10+ platforms and by institutional desks. For research syndication, licensing, or consulting inquiries, visit michaeljkramer.com.

Charts used with the permission of Bloomberg Finance L.P. This report contains independent commentary to be used for informational and educational purposes only. Michael Kramer is a member and investment adviser representative with Mott Capital Management. Mr. Kramer is not affiliated with this company and does not serve on the board of any related company that issued this stock. All opinions and analyses presented by Michael Kramer in this analysis or market report are solely Michael Kramer’s views. Readers should not treat any opinion, viewpoint, or prediction expressed by Michael Kramer as a specific solicitation or recommendation to buy or sell a particular security or follow a particular strategy. Michael Kramer’s analyses are based upon information and independent research that he considers reliable, but neither Michael Kramer nor Mott Capital Management guarantees its completeness or accuracy, and it should not be relied upon as such. Michael Kramer is not under any obligation to update or correct any information presented in his analyses. Mr. Kramer’s statements, guidance, and opinions are subject to change without notice. Past performance is not indicative of future results. Neither Michael Kramer nor Mott Capital Management guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment commentary presented in this analysis. Strategies or investments discussed may fluctuate in price or value. Investments or strategies mentioned in this analysis may not be suitable for you. This material does not consider your particular investment objectives, financial situation, or needs and is not intended as a recommendation appropriate for you. You must make an independent decision regarding investments or strategies in this analysis. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Before acting on information in this analysis, you should consider whether it is suitable for your circumstances and strongly consider seeking advice from your own financial or investment adviser to determine the suitability of any investment.

This report contains independent commentary to be used for informational and educational purposes only. Michael Kramer is a member and investment adviser representative with Mott Capital Management. Mr. Kramer is not affiliated with this company and does not serve on the board of any related company that issued this stock. All opinions and analyses presented by Michael Kramer in this analysis or market report are solely Michael Kramer’s views. Readers should not treat any opinion, viewpoint, or prediction expressed by Michael Kramer as a specific solicitation or recommendation to buy or sell a particular security or follow a particular strategy. Michael Kramer’s analyses are based upon information and independent research that he considers reliable, but neither Michael Kramer nor Mott Capital Management guarantees its completeness or accuracy, and it should not be relied upon as such. Michael Kramer is not under any obligation to update or correct any information presented in his analyses. Mr. Kramer’s statements, guidance, and opinions are subject to change without notice. Past performance is not indicative of future results. Neither Michael Kramer nor Mott Capital Management guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment commentary presented in this analysis. Strategies or investments discussed may fluctuate in price or value. Investments or strategies mentioned in this analysis may not be suitable for you. This material does not consider your particular investment objectives, financial situation, or needs and is not intended as a recommendation appropriate for you. You must make an independent decision regarding investments or strategies in this analysis. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Before acting on information in this analysis, you should consider whether it is suitable for your circumstances and strongly consider seeking advice from your own financial or investment adviser to determine the suitability of any investment.

Nvidia May Not Be Enough To Turn The Market’s Tide