As the excitement builds around Nvidia Corp’s (NVDA) impending earnings report, options traders are eagerly anticipating a seismic shift in the company’s stock.
With the earnings report for NVIDIA Corp just around the corner, the U.S. equity options market is seeing a surge of speculation on the potential movement of Nvidia’s stock, as per a report by Reuters.
According to data from options analytics service ORATS, Nvidia’s shares, which have already seen a meteoric rise of around 50% this year, could potentially swing by a dramatic 11% in either direction following the quarterly results on Feb. 21. This projected move is the largest expected shift in Nvidia’s shares before an earnings report in the last three years, significantly exceeding the stock’s actual average earnings move of 6.7% over the same period, as explained by ORATS founder Matt Amberson.
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Should this prediction come to fruition, it would result in a potential market value swing of about $200 billion, surpassing the market capitalization of chipmaker Intel Corp and exceeding the market values of approximately 90% of S&P 500 constituents.
Despite the substantial increase in the stock, demand for upside options bets on Nvidia remains strong. The stock’s 90-day 25 delta call skew, a measure of sentiment, is near a five-year high, according to a Susquehanna analysis.
“The elevated call skew tells us that investors still see the potential for significant upside despite the move already made and that there is significant demand for upside exposure as some who may be fearful of the high volatility turn to upside calls for lower-risk exposure,” said Christopher Jacobson, a strategist at Susquehanna Financial Group.
Why It Matters: The anticipation surrounding Nvidia’s earnings report comes amid a period of intense market activity. As Josh Brown, CEO of Ritholtz Wealth Management, suggested, the market may have reached a peak for the year, with Nvidia’s stock being a prime example of the current market dynamics.
Nvidia’s recent milestones, such as surpassing Google-parent Alphabet Inc as the third most valuable U.S. company and its ongoing AI advancements, have contributed to the company’s soaring market value and investor confidence.
On the other hand, Nvidia’s recent investment in Arm Holdings and other AI companies has been seen as a strategic move to solidify its position in the AI industry, potentially driving further growth and impacting its stock performance.
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Nvidia stock. Photo via Shutterstock
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