New York morning trade.
We are looking at the major US stock averages higher and we're also looking at chip stocks rebounding and this does come ahead of a catalyst packed week in video reporting Wednesday after the bell and that your speaking at Jackson Hole on Friday.
Meanwhile, the US national debt crossing $40 trillion and volatility is at a critical inflection point.
Well joining us this morning to break down options flow as well as implied moves and trader positioning is JJ Kinahan, senior VP at CO.
JJ, good morning.
Thank you so much for joining us.
So there is.
A lot going on as we head into the final trading week of August, which is hard to believe, but given what we are looking at the VIX right now, which is holding right above 15, why are markets taking all this headline noise in stride rather than, say, demanding higher volatility protection?
Yes, we do have a week where we go from the micro to the macro and you know, as you said, VIX is basically unchanged today.
We were down yesterday.
There's 15.5 to 16 level.
It just kind of seems stuck in, which I guess is a good thing because what the market is telling us is, yes, there is so much going on right now.
We saw Secretary Besscent's statements yesterday, etc. but the market is still just like, OK, wait and see, wait and see, wait and see.
And I think What the move in crude oil last night with its selling off a little bit, you know, shows us that there are some things out there where people figure that this is going to all work itself out if you were.
And just for the viewers' knowledge, a 16 VIX implies that we will have a 1% move in the S&P 500 during the day.
So again, that's not a crazy move one way or the other considering all that is going on and you're reporting on every single day.
Yes, JJ, you mentioned that term wait and see, and it seems as though all summer we have been waiting for Nvidia's earnings, and they finally report tomorrow after the closing bell, and revenue is expected to jump by about 97%, but Given the fact that we are looking at Nvidia shares higher in trade this morning after snapping a losing streak, are traders actually betting on a post earnings breakout, or are they just chasing short-term momentum right now?
Well, I think a lot of it has to do with the earnings tomorrow afternoon, as you mentioned, Nvidia finally broke its seven day losing streak.
It was the longest losing streak it had since 2022.
As we look at what the market is telling us right now, it's looking, we're looking for about just over a 5.5% move on Nvidia.
With that, we've seen particularly retail coming in, and this is a retail darling, by the way, and so we've seen a lot of activity in. the 220, 225, and 230 calls again going to that edge of the expected move.
One thing to keep in mind for people as they look at Nvidia, if you go back the last couple of years, Nvidia has had going into earnings, the implied move has been about 7.5%.
The actual move has been just under 5%.
So Nvidia has not moved, you know, lived up to.
Will the volatility that has been priced in the last few earnings cycles.
So I think it is interesting that in this earnings cycle we're coming in at just above a 5.5% implied move, kind of near what we've seen more traditionally.
I think one of the other things that's really interesting about what's happening right now has to do with how options and equity markets interact with each other.
And what I mean by that is that day.
Like yesterday, you had almost 2 times the amount of trading that we've seen over the last 10 trading days on the option side.
However, on the equity side, you only saw about 75% of what we've seen over the last 10 trading days.
So it is interesting how people are using the options market much more where they don't have to put up the same amount of money to play the earnings than they are the actual equity itself.
Yes, and I think context is key here, JJ, in terms of what we're seeing across options and equities.
But while I have you here, I do want to get your take on what we're seeing in Micron as well as Intel and call volume ahead of expiration.
So what is options action actually telling you about where traders are positioning in semis right now?
Yes, you know, a derivative, if you will, in my opinion, of the Intel earnings affecting the entire chip space is that we're seeing people also buying calls in micron, the 985 calls in particularly have been very active over the last couple of days, and another name where we saw twice, twice as much call activity as we've seen in the last 10 trading days.
So again, really interesting. to see that people may not want to necessarily just play Nvidia but play some of these other names instead.
Same thing going on in Intel.
Intel, the 95 and 100 lines for Friday.
So that one being a little bit outside Intel's expected move.
So I just think it's interesting how people are playing the derivative names of Nvidia in terms of a successful earnings there because I think one of the things that people are a little bit nervous about Nvidia, and you talked about it, Remy, you know, a 97% year over year revenue growth, I think any business would just absolutely die to have that.
But with that said, the expectations are so high it may be a little bit difficult for Nvidia to live up to that.
Yeah, and JJ, you mentioned two key words there, and that is Friday and expectations.
So this Friday, Fetcher Kevin Warsh will be speaking in Jackson Hole, Wyoming.
So how's the options market pricing risk around his debut keynote given all of this persistent monetary uncertainty out there.
No, it's a great question, Randy.
And, you know, if I go back and I look at the SPX and I look at VIX and what the market is implying in terms of the overall move, I think what the market is telling us is that we know that the new Fed chair is not a man who enjoys, it would seem, long speeches.
He likes to get to the point and get out of there a little bit, at least from his history and what we've seen.
So far as him as the new Fed chair, so I don't think that the market is necessarily pricing in that he's going to come out with some breaking news there.
Obviously we've had a lot of news out of the Treasury over the last couple of weeks and again yesterday afternoon, but I don't know that we necessarily see the Fed tipping its hand one way or the other at Jackson Hole.
I think it would be surprising to the market if he did anything that, you know, that really tilted uh people's feelings on what he's doing next, one way or the other.
And again, I think when you're Fed chair, if you say the with a little bit too much emphasis, people go crazy because they just scrape every single word you say, you say.
So he has to be very, very measured in everything he says to begin with.
Do you Yes, we will definitely be paying close attention to Warsh's speech on Friday morning.
But finally, before I let you go, we have a little over 60 seconds here, so I do want to shift our focus on over to the overseas market.
Two names come up in particular, Alibaba as well as Samsung.
So do you think investors are looking at both of these names and concerned about their spending strategies as well as high cost AI dilution?
What's going on with these names?
Yeah, the Samsung, obviously a lot of spending, but I think the Alibaba is the more interesting story, Remy.
And the reason I think they're more interesting is because they went with this, uh, you know, stock sale, uh, earlier this week.
And so, one of the questions that comes with that is, why would you dilute your stock rather than sell bonds.
So the next question I think it's bringing up for many investors is, The next round be a bond sale because for many people that didn't make a whole lot of sense that they did that and so we will have to watch it and I think people are a little bit nervous of the name because again they want to become a leader in AI as we both know as you report on, you know, every single day that doesn't happen without spending a whole lot of money.
So what's going to be their next avenue in order to raise money and I think that's what has the street a bit nervous on that.
Well, JJ, we will have to leave it there for today, but I appreciate your time.
Thank you so much for joining us from the forum this morning.
