Trading the Expectation Gap: Tactical Plays on NVDA, NKE, and CM

The options market is a powerful lens for seeing what traders are really betting on, separate from the stock's recent price action. For these three stocks, the divergence between the two tells a clear story of expectation arbitrage.

For Nvidia, the message is one of extreme caution. Despite the stock's recent slide, the options pit is dominated by sellers. The most active contract, the January 26, 2026 190 Call, saw 60,703 contracts traded, accounting for nearly 10% of all NVDA options volume. Crucially, 63.9% of those contracts were sold, with professional traders leading the charge. This isn't a bet on a breakout; it's a bet on the stock staying put. The implied volatility has already dropped, signaling a cooling of near-term fear. The market is pricing in a lack of meaningful upside beyond $190 for the near term, a clear case of selling the news.

Nike presents a different dynamic. The stock is still down 13.24% year-to-date, reflecting a long-term struggle. Yet the options activity shows a bullish sentiment that the stock price hasn't yet caught up to. On December 26, volume was 60% above average, and the put/call ratio was bullish at 0.70. This suggests traders are placing bets on a rebound, likely anticipating the momentum from its recent strategic turnaround. The setup is classic: the market is pricing in a recovery, but the stock is still digesting years of disappointment.

Canadian Imperial Bank of Commerce offers a defensive bet. Its options volume on December 26 was 1,788% higher than its 30-day average, with all eight unusually active contracts being calls expiring just two weeks later. This concentrated, short-dated call buying points to a tactical bet on stability, perhaps hedging against a potential recession or simply betting on a quiet, steady climb. The market is pricing in a defensive rally, but the stock's broader performance has been more muted.

The bottom line is a market in three parts. The options reveal a market pricing in a lack of near-term upside for a leader (NVDA), a rebound in momentum for a laggard (NKE), and a defensive bet on stability for a bank (CM). The actual stock moves, however, show the market is still in the process of digesting these expectations. The arbitrage opportunity lies in recognizing that the options are often right about sentiment, but the stock price takes time to follow.

The Reality Check: Where Expectations Are Being Met or Missed

The options market is a powerful lens for seeing where the market's priced-in expectations diverge from the stock's real-time performance. For Nvidia, the disconnect is stark: heavy call buying is being met with a falling stock price, signaling a classic "sell the news" dynamic. For Nike, high options activity coincides with a strong quarterly beat, yet the stock remains deeply skeptical of a turnaround. For Canadian Imperial Bank of Commerce, options activity is not tied to earnings, suggesting traders are positioning for a broader market move.

Nvidia's Jan-26 190 call is the standout example of expectation arbitrage. The contract saw extraordinary interest, trading 60,703 contracts-nearly 10% of all NVDA options volume that day. Yet the stock itself fell 1.58% to $187.52. The key is the order flow: approximately 64% of those contracts were sold, with professional traders accounting for 58% of the volume. This isn't a bullish bet; it's a wave of selling pressure, likely from institutions hedging or collecting premium. The result is a falling implied volatility, indicating the market is cooling off on the idea of a near-term breakout. The options activity priced in a rally, but the stock's move shows the market is selling that hope.

Nike presents a different, more skeptical picture. The stock is down nearly 60% over the past four years, including a 19% decline in 2025. Yet the options market shows unusual activity, with volume up 60% above average and a bullish put/call ratio. This activity aligns with a recent Q2 beat and a brand recovery narrative. The disconnect is that the market has priced in a long-term collapse. The options activity suggests some traders see a near-term floor or bounce, but the stock's brutal 2025 performance shows the broader market remains deeply skeptical of the turnaround story. The options are betting on a short-term reprieve, while the stock price reflects a long-term disappointment.

Canadian Imperial Bank of Commerce offers a third case: options activity not tied to specific news. On December 26, the bank saw options volume of 155,863, 1,788% higher than its 30-day average. Crucially, all eight unusually active options were calls expiring on January 16, and the next earnings report isn't until February 20. This is a classic case of traders positioning for a broader market or sector move, not a company-specific catalyst. The activity suggests a bet on a post-holiday market rally or a sector rotation into financials, but it's not a signal about CM's own fundamentals. The market is using options to express a macro view, not a micro one.

The bottom line is that options volume alone is a poor signal. The real insight comes from analyzing the activity against the stock's price action and the broader narrative. When heavy call buying is met with a falling stock, it's a sell signal. When options activity coincides with a stock that has already fallen far, it's a bet on a floor, not a trend. And when options volume spikes without earnings news, it's a bet on the market, not the company. For traders, the opportunity is in spotting these mismatches between the options market's bet and the stock's reality.

Catalysts and Risks: What Could Close the Expectation Gap?

The expectation gap for these three stocks hinges on specific catalysts that could either validate or shatter the current market pricing. For NVIDIA, the gap is between its soaring valuation and the sustainability of AI demand. For Nike, it's about whether brand momentum can overcome a weak China and a depressed stock price. For Canadian Imperial Bank, it's whether the bank can navigate a potential recession without its premium valuation being punished.

For NVIDIA, the key catalyst is the next earnings report, which will test the trajectory of AI demand. The stock is trading at $186.50, well below its 52-week high of $212.19. The market is pricing in a period of high growth, but the risk is that the stock's recent pullback reflects a reassessment of that growth path. The expectation gap here is whether the company's next results show demand cooling or if the momentum from data center and gaming continues to justify the premium. The stock's 52-week low of $86.62 is a distant memory, but the path back to that high would require a severe disappointment. The catalyst is clear: another quarter of robust growth from its core AI business would close the gap and likely push the stock higher. Any sign of demand softening, however, would widen the gap and pressure the valuation.

For Nike, the catalyst is continued brand momentum and a recovery in its critical China market. The stock is at $63.71, still far from its 52-week high of $82.44 and down sharply from its peak. The market has priced in a period of weakness, with the 52-week low of $52.28 serving as a stark warning. The expectation gap is whether CEO Elliott Hill's turnaround strategy is gaining real traction. The recent Q2 beat, driven by a 9% higher North American revenue, is a positive signal. The catalyst is a sustained improvement in China sales and a rebound in consumer sentiment, which would validate the brand's recovery and close the gap between the depressed stock price and its underlying business health. The risk is that China's economic challenges persist, keeping the stock near its lows.

For Canadian Imperial Bank, the catalyst is the bank's performance during a potential 2026 recession. The stock is up 39% in 2025, but its valuation has expanded, with a P/E ratio of 14.77 above its five-year average. The expectation gap is whether the bank's strong capital position and historical resilience can be trusted in a downturn. The risk is that the premium valuation prices in perfection. The catalyst is the bank's Q1 2026 results in February, which will be watched for signs of loan loss provisions or slowing credit growth. If the bank navigates the recession with minimal stress, the gap between its strong performance and its elevated P/E could close. If not, the valuation could contract sharply.