Lessons for next time after Nvidia's stock didn't surge, and options tanked, following blowout earnings

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Nvidia earnings were spectacular -- but the stock market reaction wasn't, and options were basically a disaster. What lessons can be learned?

An eventful week that included Nvidia earnings and Jerome Powell’s Jackson Hole address ended with a solid if not spectacular 0.8% gain for the S&P 500 SPX, which at least brought a streak of three successive weekly declines to an end.

And how about for the you-only-live-once option traders? The at-the-money calls quickly turned negative and by the end of the first trading day after Nvidia’s results had lost nearly half their value. The out-of-the-money calls, at a certainly not improbable $500 strike, lost about two-thirds their value. The Aug. 25 $475 calls opened with a small gain before quickly losing value and ending up worthless.

In general, he says, the smart play is to buy ahead of others’ anticipation. But his kicker is really the true lesson here: “Playing the actual event is a tough way to make money.” The buzz China announced a reduction in stamp duty and reduced margin requirements. Separately, developer Evergrande EGRNF, +900.00% finished 79% lower in its first trading day in Hong Kong since a suspension last year.

 

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