Massive conviction in precious metals: huge call buying

Key Concepts

• Burough Lives Trade: Consistent and significant buying pressure in precious metals (Silver - SLV, Gold - GLD).
• Options Flow: Tracking the buying and selling of options contracts to gauge market sentiment and potential price movements.
• Capex (Capital Expenditure): A company’s investments in fixed assets, crucial for evaluating Nvidia’s future growth potential.
• IV (Implied Volatility): A measure of the expected price fluctuations of an asset, increasing before earnings reports.
• Gamma Squeeze: A situation where options trading exacerbates price movements, potentially leading to rapid gains or losses.
• Unusual Option Activity: Large and potentially indicative trading volumes in options contracts, suggesting informed speculation.

Market Overview & Precious Metals Surge

The discussion began with a positive market outlook despite initial concerns stemming from tariff adjustments announced by former President Trump on Monday. While Monday saw a sell-off, the S&P 500 had recovered significantly, gaining over 100 points by the time of the conversation. Pete Nagarian expressed a bullish leaning, particularly when faced with seemingly irrational sell-offs, citing strong earnings and the persistent “Burough Lives trade” as key supporting factors.

The “Burough Lives trade” – a sustained buying trend in precious metals – was highlighted as exceptionally strong. Specifically, silver (SLV) and gold (GLD) were experiencing substantial inflows. Nagarian noted the continued buying pressure in silver, even after significant price increases, with examples like 17,000 calls at the $74 strike price last Friday and 19,000 calls at the February $80 strike price on Monday. He emphasized the consistent demand, stating, “The trade hasn’t stopped. SLV at 82. Where are you seeing the buying action… Huge conviction.” He also pointed out that even when the silver chart appeared weak around $65, gold (GLD) offered a stronger alternative, but now both are performing well, with silver making higher highs.

Regarding gold (GLD), the options flow was described as “extraordinary,” with large blocks of calls being purchased, such as 56,000 March $495 calls and 55,000 March $485 and $505 calls. These buyers were primarily utilizing spreads, typically purchasing calls 15-20 dollars higher than the current price. Nagarian remarked, “GLD is just… it’s almost like where is it? You know, when we get to 2:00 and we haven’t seen a GLD trade, it’s kind of I go looking around to try to find where it is.”

Coreweave (CRWV) & Unusual Options Activity

The conversation shifted to Coreweave (CRWV), a stock that had previously experienced a hot trade but had since become rangebound. Nagarian highlighted continued buying activity in Coreweave options, specifically the purchase of 22,000 March $115 calls for $1 each and 23,000 April $130 calls for around $5 each. He attributed this activity to the company’s potential in the Gen AI and cloud platform space, stating, “There’s not somebody out there saying they’re tired of it. They’re still seeing that Coreweave has some potential to the upside.” He also disclosed owning a small position in the stock based on this unusual options activity.

Nvidia (NVDA) – Earnings & Potential Breakout

Nvidia (NVDA) was a central focus, with both speakers expressing optimism ahead of its earnings report. Nagarian pointed to significant options activity on Monday, with the purchase of 25,000 March $205 calls at $4.60 each, which had already doubled in value. He emphasized the importance of Nvidia’s earnings numbers and, crucially, its capital expenditure (Capex) figures. High Capex has historically been viewed negatively by investors.

Nagarian praised Nvidia’s management, particularly Judson Wong, for effectively managing the narrative surrounding the company. He stated, “Judson Wong does a great job of of controlling the narrative as best as he can.” He expressed confidence in Nvidia’s ability to deliver positive results, potentially leading to a breakout above the $190s range it had been trading in.

Data points mentioned included Nvidia’s annualized earnings growth of 70-73% and year-over-year revenue growth of 66%, with earnings growing at a faster rate than revenue, indicating improving margins. The speakers acknowledged that even a miss on earnings wouldn’t necessarily be detrimental given the company’s already impressive performance. As Oliver stated, “It’s just even if they miss, it’s like they’re still doing insane numbers.”

Market Volatility & Potential Risks

While generally optimistic, the discussion acknowledged potential risks. Oliver highlighted the possibility of a “second derivative type gamma squeeze” in either direction, given the S&P 500’s continued trading within a range. He cautioned that a breakdown of this range could trigger a significant market correction. However, he ultimately expressed a bullish bias, believing the market was more likely to break to the upside. He noted the importance of Nvidia’s performance as a key factor in determining the market’s direction.

Synthesis & Main Takeaways

The conversation painted a picture of a resilient market, driven by strong earnings, the persistent “Burough Lives trade” in precious metals, and particularly by Nvidia’s continued dominance. Unusual options activity served as a key indicator of investor sentiment and potential price movements in stocks like Coreweave and Nvidia. While acknowledging potential risks related to market volatility and Nvidia’s Capex figures, the overall tone was optimistic, suggesting a continued upward trajectory for the market, especially if Nvidia delivers on expectations. The emphasis on tracking options flow as a leading indicator of market trends was a recurring theme throughout the discussion.