When I woke up this morning, I couldn’t believe my eyes. I had finished drafting this post before going to sleep, and the first thing I see on @X after waking up is Gary Gensler’s post claiming that the @SECGov account was hacked and that the #Bitcoin ETF wasn’t actually approved (yet) by the #SEC.
Dear lord, how bad things have become if we’ve reached a point where, according to laws and regulations, the SEC, which is in charge of enforcing those laws, will now be forced to investigate itself for market manipulation?
$NVDA is what I wanted to talk about today, and the title of this post was a quote I already shared 24 hours ago in the post below, where I highlighted the too obvious coincidence between the Reuters article and the action in the option market that triggered a spectacular stock squeeze in the last two trading sessions, despite a non-stop stream of news that is the complete opposite of #bullish for the Semiconductor sector:
- WSJ reported that big $NVDA clients like #Tencent and #Alibaba won’t be interested in buying “downgraded” GPUs (how can we blame them?)
- #Samsung warned that fourth-quarter profit could plunge 35% – CNBC
- $MCHP announced that they expected a 22% drop in revenues – Barrons
- #Foxconn expects Q1 revenue drop after slower Q4 demand – Reuters
What strikes me the most here is that, despite $NVDA being a 1 trillion $ company now, short-dated ultra-deep OTM options trade as if it were a company with a fraction of the market capitalization.
The 600 Strike Call expiring on Friday 19th saw more than 33k contracts traded in the last session, resulting in an OI of 35.4k contracts by close. This option price implies that $NVDA has a 1.3% chance of hitting $600 by the following Friday, which translates into a $150bn increase in its valuation. Putting this into another perspective, of all the companies included in the $SPX index, only ~50 have a market capitalization above $150bn. Or we can even see this as equivalent to the sum of 8 quarters of revenues of $NVDA itself. If you think a 1.3% chance is small, beware that was the same probability $NVDA would hit a $530 price when #stocks resumed trading on Tuesday last week.
All of this doesn’t make sense at all, right? Shouldn’t the #SEC investigate this? Ahah well, at least after today, we will know what the #SEC is busy investigating… Themselves!
I am trying to make some humor here, but the matter is incredibly serious. Let’s put $NVDA aside for a second and ask ourselves how much “passively” managed money is being forced to flow into #stocks nowadays at valuations that are completely out of this world and that no professional “human” would dare to even consider because that would seriously imperil their career? True, we saw this type of craze during the #DotCom bubble, but the magnitude of monetary value reached at that time is almost laughable compared to today, isn’t it?
There is a survey going on this morning here (TwitterX). So far, 5,204 people have voted that they have no confidence in the SEC, or about 86% of the survey participants. I mean, 86% is a big number, right?
Let me conclude today with an open question: If there is such a widely shared view that the current SEC isn’t doing its job, implying that the market is a wild west, how is it possible not to point out a widespread market manipulation activity when things like the one I described above with regards to $NVDA happen?
