A Stalemate, With Big Swings Coming for META
Semiconductors have fallen to a fairly meaningful support level. For more downside from here, they need to break below it with conviction. For upside, they need to hold the support.
So the big orders opened Friday were very extreme: buying short-term deep out-of-the-money puts, the kind that cost a dime or two. The upside is that if the market crashes at Monday's open, they double right away. The other upside is that if the market opens higher, you only lose a little. It's a bet with almost no downside.
But from other players' point of view, when big buy orders are very cheap, it usually means the direction they're betting on is seen as low probability.
Another less cheap bearish play is buying out-of-the-money puts, say expiring next year. That works better for positioning before a crash, not halfway through one — it's expensive. Notably, $XSP 20270115 735.0 PUT$ traded about 50k contracts, about $50M+ in notional.
That's a heavyweight bet, but a major bearish order entering at this point is a bit awkward. So whether it's bullish or bearish, Wednesday's after-hours Meta earnings are key.
If Meta earnings go well, SPY flies. If Meta earnings disappoint, Trump accounts auto-investing in the S&P 500 could see their first losing month.
Such a suspenseful situation is indeed very suspenseful. Even institutions are giving it plenty of room to swing either way, without a clear direction.
Right now there are two notable big order groups: a dual-buy strategy and a bearish call spread.
Buy $META 20261218 640.0 PUT$ ,Buy $META 20261218 740.0 CALL$
Sell $META 20261023 780.0 CALL$ ,Buy$META 20261023 790.0 CALL$
The first group means buying the 640 put and 740 call, betting on a move bigger than 7.5%. The second group means betting the upside move stays under 10%. So either way, a big move of less than 10% is unlikely this time. Which direction it goes is unclear, but there are still two days to see how the latecomers bet.
Even though Tesla's flying car was impressive, it doesn't help earnings much. Institutions chose a 370/380 bearish call spread: $TSLA 20261023 370.0 CALL$ $TSLA 20261023 380.0 CALL$ . In other words, they expect this week's earnings won't push the stock above 380.
Makes sense — the tone of this earnings season is down.
SPCX earnings positioning is also extreme. Put simply, the stock won't go above 170 this week. So you can sell calls.
There's news on SPCX: Musk announced he'll give every American child one share of SPCX stock. Last week the Treasury was vague and refused, but this week it agreed. That shows the rich people donating to the 70 million accounts really did sell stock to raise the money.
SPCX, with a $2 trillion market cap, also has a lockup expiring, plus another round of selling. That's clearly more pressure on the stock market, so the US government had to hold its nose and agree.
Intel and Nvidia put strikes were opened at half the current price, for the reason mentioned at the top. So you can see the 55 buy put and 70 sell put $INTC 20261030 70.0 PUT$ opened at the same time. Both are rational, but probability-wise, the latter has a higher chance of making money.
Nvidia won't go above 230 this week. If it breaks below 215 this week, the next target is 205.
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