Subscribe to receive this FREE daily commentary directly in your email
It was a volatile trading session today, with the S&P 500 finishing up about 40 basis points. That actually understates the day’s swings, as the index climbed roughly 1% in the morning before giving those gains back, then recovered slightly into the close. The day was largely driven by liquidity coming into the market and implied volatility ramping up into the close, which pushed the index lower. In the end, much of what unfolded was what I alluded to yesterday.
The VIX 1-day closed at a scorching 27, which suggests there should be a sizable rally tomorrow—at least at the start of the day—until implied volatility settles or the liquidity drain takes over.
Tomorrow is a Treasury settlement date with $18 billion due to settle, which means we could see liquidity pressure return to some degree. Repo rates dipped today to 3.95%, which suggests SOFR may be lower in the morning. But more importantly, repo rates could rise again tomorrow.
Nvidia did its usual song and dance with the beat-and-raise routine it trots out every quarter. One day, analysts will wise up and adjust their numbers higher so these “beats” aren’t really beats. All I had to do was look at historical trends to come up with my estimates: revenue of $57 billion and a guide of $64 billion. Without any channel checks or fancy models, I was able to get the revenue number, and was only $1 billion below the guide.
Then there was the recycled news about a $500 billion backlog, originally discussed on October 28, which, of course, helped push the shares up tonight.
Anyway, the stock remains in positive gamma, which is likely why it’s stuck in this $195 to $196 range. On top of that, the $190 calls for Friday were trading at $5.25 at the end of the day Wednesday, which means they’re basically breaking even or up slightly, since IV is going to come down hard tomorrow. So it will be curious to see how long it takes for those calls to start getting dumped by the $190-and-above crowd tomorrow.
-Mike
Glossary by ChatGPT
Basis Points – A unit equal to 1/100th of a percentage point used to measure changes in interest rates or index levels.
Gamma – An options Greek measuring how quickly an option’s delta changes relative to price movements in the underlying asset.
Implied Volatility (IV) – The market’s expectation of future price fluctuations embedded in options pricing.
Repo Rate – The interest rate at which securities are sold and repurchased in the repurchase agreement market.
Settlement Date – The date on which a trade or issuance is finalized and cash and securities are exchanged.
SOFR – The Secured Overnight Financing Rate, a benchmark reflecting the cost of borrowing cash overnight collateralized by Treasury securities.
VIX 1-Day – A very short-term volatility index measuring expected one-day S&P 500 volatility derived from options pricing.
Disclosure
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.
Subscribe to receive this FREE daily commentary directly in your email
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 Options Positioning Creates Risk for Upside Bets
Mott Capital's Market Chronicles 12 hours ago