It is a market moving week with mega cap earnings and Fed rate decision on top as well as a set unwind and crude oil, at least for now, and to kick off the week's semiconductors are getting hammered.
We are looking at shares of Nvidia as well as AMD down today, and this just followed the South Korean Kosi sliding in overnight trade, taking down shares of SK Heine overnight as well as Samsung.
And even those tech slips of retail traders are swarming in.
Yesterday we saw this with Mike.
On shares and with the creeping up to that critical 20 level and heavyweight earnings from Visa after the bell as long as well as mega cap tech on deck and the options market is flapping its wings and Visa is expected to report after the close and Bloomberg reporting that the company is announcing layoffs of around 7% of its workforce ahead of the report and we are looking at shares hitting 52 week highs in New York morning trade.
Well joining me this morning to weigh in is JJ. senior VP and head of retail expansion at CBOE.
JJ, good morning.
Thank you so much for joining us.
There are a lot of headlines to cover this morning.
So let's start out with the big picture here.
We know that we're looking at crude oil prices lower after last week's gain and we are awaiting that Fed rate decision tomorrow.
But what is the option market telling you about how institutional and retail traders are hedging into the rest of this week?
If I look at the week overall and I look at the big headlines, there are two things that kind of stand out to me, as you said, crude oil already being one.
But then you also have the VIX.
Now the VIX, for those who aren't as familiar with it, it's called the fear index.
What it really does is it just measures volatility.
It measures the amount that people really feel the need to hedge because of the expected moves up and down going up.
20 tends to be a bit of a warning level overall.
We are hovering right below that right now with the.
Few days of selloff we've seen the VIX slowly creep up.
Now something to keep in mind though is we're still continuing to see this by the dip mentality exist.
We're seeing clients, retail clients, particularly coming in buying the 7400 calls, which isn't a big surprise because we're trading just below there on the SPX, which is the S&P 500 cash, but also the 7500.
And if I look out from now through Friday, the expected move in the S&P 500 is 125 points.
Maybe, you know, sounds like.
A huge move, but on a 70, you know, basically $400 product, not percentage wise a gigantic move.
So again, if you're going to play in there, you got to keep that in mind that that's what's priced in right now.
But again, what we're seeing is retail buying the higher end of that again, as you and I talked a few weeks ago, Remy, the buy the dip mentality, it's paid off for people for so long and we continue to see that in retail and as you said, we saw it in those chip makers yesterday for the rest of this week.
Yes, so I do want to expand on the chip makers, JJ, especially given the price action we saw yesterday, this morning at the New York Open and overnight in Asia trade.
So when it comes to Micron as well as AMD and Nvidia, what are you seeing right now in terms of positioning?
So I will say this for Micro and AMD, we continue to see people playing them for the upside, buying calls primarily for Wednesday and Friday that are higher than the current price.
So they do believe we'll see that bounce.
Nvidia is the one that I find the most interesting.
It's a bit more of a darling, if you will, of the retail trader.
It's always in the top 5 traded names for retail overall for obvious reasons in terms of what they've done overall.
We're Continuing to see people coming to buy the 200 calls on both Wednesday and Friday.
So very interesting overall, as well as the 170 put.
What's really interesting, all three of those names traded at least twice what they have traded in terms of volume over the last 10 days.
So lots of interest in all three of those names.
Nvidia trading 3 times more on the put side and just under 3 times more on the call side than it trades than it's traded in the.
Last 10 days, so clearly a lot of action there, clearly a lot of opinions there, but I do find it interesting with, uh, you know, what, what the with what Nvidia announced in terms of their AI investment that people are perhaps a little bit more nervous there.
We're seeing some people talk about a circular logic in terms of investment, so that's one that I do think that has made the market a bit more nervous than perhaps some of the just chip maker fallout that we're seeing.
And of course it is earnings season and there are a lot of names that we're paying attention to after the bell, but I do want to zoom in on Visa, especially given the fact that we saw shares of Visa hit 52 week highs this morning at the open around the 36. level and we will be getting earnings after the close as well as tomorrow and Thursday.
We're paying attention to the big names including Microsoft, Amazon and Apple.
But when we're looking at thesesa, what kind of moves are options markets currently pricing.
The first thing is they are pricing in about a 3% move, but I think the really important again that is up or down.
I wish they would tell us which way it was going to go, but that said, I think the important thing to keep in mind for Visa, what many people are looking for is of course growth and transaction revenue, but did they get a World Cup bump?
And that's what many people are looking for overall, you know, they talked about it at the beginning of the tournament, but people are now looking in the earnings to say, OK, with the people traveling over to the US, people spending money, New York, Boston, Kansas City, did Visa get that bump overall that was expected going into it, and if that disappoints, you know, the earnings may fail.
Now what we're seeing out of people betting on it on both retail and institutional side is again for for this stock to continue higher in terms of what they're playing in options.
So as you just said, it's a 52 week high but has so much momentum people both in retail and institutional side believe it's going to continue higher in terms of what we're seeing in the call activity.
And before I let you go, last week we got earnings out from Alphabet, and this week we'll continue to monitor what comes out of the hyper scales, and I do want to mention that yesterday we saw Apple surpass Nvidia yet once again when it came to market cap.
But when it comes to the sentiment around AIAX after Alphabet's guidance, what do you think is the key takeaway here and what are you paying attention to over there?
I think the two most interesting out of the big names you have this week are going to be Microsoft and Meta, and so both of them are expecting about a 7% move.
Meta expecting about a 7.5% move on their earnings.
Microsoft expecting about a 7% move.
And what's interesting to me when I look at Microsoft is that over the last year they've only had about a 5% move based on their earnings.
In terms of Microsoft, it comes down to Azure and have they continued that growth overall.
So we to look to see if they have.
If they have, that could be very, very good in terms of meta what people are going to be looking at.
And one thing to keep in mind about meta, in the last two quarters they've beaten on earnings per share.
They've beaten on revenue, stocked down both times.
So this is a really tough bar for them, it seems no matter what they do.
And so we're going to have to look there in terms of advertising revenue and probably the big thing, and I know you've been talking about it, Remy in terms of all of the AI is.
Cap, how much money are you spending in order to bring AI to the market, and this continues to be the big question.
We know there's been a lot already spent, and the questions around return on investment continue to be asked, and I think that is the most important point for Meta and actually all of these stocks, you know, maybe not as much Apple because they don't have as deep an AI bench as Amazon Meta and Microsoft do, but that will be the question that's going to be number one on people's minds.
Well, JJ, we will have to leave it there for today, but as always so great talking to you.
Thank you so much for weighing in on these key names here and thank you so much for, yeah, thank you so much for your insights.
