Nvidia 0DTE Holders Move to Longer-Dated Options, Tesla Options Jump After Powell Speech

Luzi Ann Santos joined discussion · Aug 24, 2024 02:20

$NVIDIA (NVDA.US)$ is seeing holders of zero-days-to-expiration (0DTE) call options pull what's left of their money about an hour before trading closes. They don't seem to be retreating yet and are probably just rolling the options to longer maturity dates.

Nvidia and Tesla $Tesla (TSLA.US)$, continued to hold the crown for the most popular stock options. Shares of the two companies rallied Friday, tracking gains across the broader market, after Federal Reserve Chairman Jerome Powell said "the time has come" to start cutting interest rates.

"Here comes the punchbowl," Bloomberg quoted David Russell, global head of market strategy at TradeStation, as saying. The punchbowl metaphor was made famous in October 1955 by then Fed Chair William McChesney Martin, Jr., referring to Fed moves that could juice the market rally.

"This keeps a tailwind at the market's back into year-end, making it harder to expect a retest of this month’s lows," Russell said.

Source: moomoo mobile app

(To see Nvidia's options chain, click here. For the options market page, click here.)

Around 2 p.m. in New York Friday, more than 430,000 call options that give the holders the right to buy Nvidia shares at $130 each changed hands across 20 expiration dates that stretch through Dec. 18, 2026, data tracked by moomoo showed. While the bulk of those contracts are in 0DTE, those expiring at later dates saw the prices rise, which could signal that money may just be moving around, instead of pulling back.

Another tailwind behind Nvidia's continued rally could be the optimism over the chipmaker's earnings due next week. On average, analysts expect the company to report a 157% jump in adjusted earnings to 65 cents a share for the fiscal second quarter that ended July 31, according to estimates compiled by Bloomberg. Nvidia has blown past analyst estimates for six straight quarters, Bloomberg data showed.

Source: moomoo mobile app

(To see Nvidia's financial data on the moomoo website, click here.)

In the case of Tesla, the most popular contracts are the call options that give the holder the right to purchase the stock at $220. More than 216,000 calls with that strike price traded so far across its 20 series that stretch through Dec. 18, 2026, data tracked by moomoo showed. More than three-quarters of that volume are in 0DTE.

The price of the 0DTE $220 Tesla calls climbed 70% to 68 cents as the stock price jumped 4% to within close range of that strike price. Volume jumped to about nine times that of the open interest. That increasing demand may be, in part, driven by stockholders who are buying back the call options before the option holders exercise them.

Source: moomoo mobile app

(To see Tesla's options chain, click here. For the stock options ranking, click here.)

At the same time, the price of the calls expiring next week with that same strike price also jumped, rising 82% to $5.50 per share of the 100-share options contract. Volume climbed to more than four times the open interest.

The rally in the options market mirrored the positive sentiment that sent the $S&P 500 Index (.SPX.US)$ and the $Nasdaq Composite Index (.IXIC.US)$ advancing more than 1%.

Powell's keynote speech at the Jackson Hole symposium hosted by the Kansas City Fed provided "the clearest signal that he's open to a jumbo rate cut – even given the recent unemployment data," Anna Wong, a Bloomberg economist, said in a note. "The bar for a 50-bp rate cut in September is low – with the Fed chair himself probably already on board. The question is whether Powell can convince colleagues to join him."

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