Yesterday’s reversal pissed me off.
I had my finger on the trigger, ready to trade it, and I backed away. I don’t often do that. Man, that thing came out quick, and it got wicked inside the Nasdaq.
This morning everybody wants to talk about the election. I get it, but the results aren’t going to play out today, and the options market isn’t pricing much for them. The races that aren’t close get called early, and the rest are going to take considerable time.
The most important thing on the screen today is AMD, and it reports after the bell.
AMD Means More Than Apple Tonight
In my humble opinion, and humble is not one of my qualities, AMD means more than Apple. AMD is an $800 billion company that’s up 118% this year. When that much market capitalization moves, it matters.
The options are pricing a big-league move by Friday, about $50, or more than 10%.
The Chip Fund Has Nothing Under It Until 350
The SMH, the big semiconductor fund, is testing into 500. What do you got under 500? Nothing until you’re like a 350.
Intel already fell flat on its face after earnings, and it was up more than 130% on the year going in. Micron is up 175%. Nothing can save the SMH from the abyss other than maybe AMD.
Will AMD turn out to be a nothing burger? If it moves inside the range the options are pricing, sure. I still think it moves the semiconductors in a big way tomorrow.
Risk $1 To Make $2 Or $3
The irony is you can’t do anything about it, because it’s earnings. It’s a coin flip whether it goes higher or lower, and it doesn’t matter whether you think the stock is overpriced.
Don’t get caught looking for a big move, because the options are already priced for one. The QQQ, the Nasdaq-100 fund, has about $20 of movement priced in between now and Friday. Buy an option outright here and you’re paying up for volatility, meaning the size of the move the market expects.
If you want to play it, take one side and use a spread.
You buy one option and sell another one further out against it, which cuts your cost and most of your exposure to volatility. Aim for one-for-two or one-for-three, risking a dollar to make two or three.
Before the close today, decide which side you’d take and what you’re willing to lose. If you aren’t okay losing every dollar you put into the spread, don’t do the trade, period.
To your success,
Don Kaufman
P.S. By tomorrow morning the market has to price AMD’s numbers and the first election results at the same time. Join me live at 9:30 a.m. ET Wednesday, right at the open, and I’ll show you whether the AI trade is dead and gone. This session could set up the rest of 2026.
