Hey Traders,
Last week, Nvidia reported earnings.
And I saw something that should be a wake-up call for anyone who thinks buying puts and calls is the easy way to riches.
What’s an “Expected Move”?
Options markets actually tell you what kind of move a stock should make by a certain date.
You find it by adding the price of the at-the-money call and the at-the-money put that expire that week. Take about 85% of that number, and you’ve got the “expected move.”
So if those two options cost $10 total, the stock is expected to move about $8.50 up or down by expiration.
What Happened With Nvidia
On paper, Nvidia’s expected move around earnings was big. Traders piled in, paying steep premiums for options that were supposed to cash in if the stock jumped.
But the stock barely budged.
The result? Everyone who bought those options lost 100% of their money.
Why That Happens
Here’s the kicker: the expected move is already baked into the option price.
So unless the stock moves more than the expected move, the options you bought bleed out fast. Time decay kicks in, and those contracts go to zero.
That makes it nearly impossible to make money just buying at-the-money calls or puts into earnings.
Where the Real Money Is
This is why I keep hammering on selling options:
Selling naked puts.
Selling covered calls.
Selling credit spreads.
All of these bring in premium up front.
And right now, premiums are sky-high — even on names like Gap or Urban Outfitters, not just tech.
That means you can collect cash without needing the stock to go higher. The stock can go sideways, even down a bit — and you still get paid.
Bottom Line
Don’t get hypnotized by the “expected move.”
If you’re buying options, the deck is stacked against you.
But when you’re selling options, those inflated premiums are working for you instead of against you.
That’s where I see the edge right now — and that’s where I’m putting my money.
Trade well,
Jack Carter
P.S. Consider Apple stock radioactive for the next 10 days. Don’t touch it! Here’s 3 tickers I’m watching instead!
